incentive structures as a capacity development strategy in...

Incentive structures as a capacity

development strategy in public

service delivery

Inger Ulleberg

International Institutefor Educational Planning

Rethinking capacity development

Incentive structures as a capacity development strategy in public service delivery

Incentive structures as a capacity development strategy in public service deliveryA literature review and annotated bibliography on the role of incentives for civil servants within capacity development policies

Inger Ulleberg

International Institutefor Educational Planning

The views and opinions expressed in this book are those of the authors and do not necessarily represent the views of UNESCO or IIEP. The designations employed and the presentation of material throughout this review do not imply the expression of any opinion whatsoever on the part of UNESCO or IIEP concerning the legal status of any country, territory, city or area or its authorities, or concerning its frontiers or boundaries.

The publication costs of this study have been covered through a grant-in-aid offered by UNESCO and by voluntary contributions made by several Member States of UNESCO, the list of which will be found at the end of the volume.

Published by: International Institute for Educational Planning7-9 rue Eugène Delacroix, 75116 Paris, [email protected]

Cover design: Cover photo: Typesetting: Linéale ProductionPrinted in IIEP’s printshopISBN: 978-92-803-1344-4© UNESCO 2009

mailto:[email protected]

http://www.iiep.unesco.org

5

CONTENTS

List of abbreviations 7List of fi gures 9List of boxes 9Foreword 11Summary 13Résumé 15Introduction 171. Rationale 19 Incentives, public performance and capacity development:

a chain of causality 19 Public capacity erosion and the limited impact of training:

incentives matter 21 Defi ning, discerning and operationalizing incentives 232. Frameworks and types of incentives 27 Financial versus non-fi nancial incentives 27 A typology of incentives and additional levels of analysis 32 Frameworks of public performance and capacity 363. Changes and challenges 45 Dual explanation for the limited impact of incentives 45 Weaknesses of present incentive systems 46 The diffi culties of reform: obstacles to implementation 594. Reforms and successes 67 Renewed interest in incentives for civil servants 67 Pay-based and merit-based reforms 69 Accountability 755. Policy suggestions 79 Encourage transparency, merit and professionalism 79 Foster capacity through HRM 81 Assess external ‘pull’ and ‘push’ factors for reform 82 Carefully consider the scope and pace of reform 84


6

Contents

6. The impact of incentives within the civil service on capacity development in education 87

A methodological note 87Annotated bibliography 95Annex 1 141


7

LIST OF ABBREVIATIONS

ATP Advanced Training Programme (IIEP)BEEPS Business Environment and Enterprise SurveyBPR Business Process ReengineeringCPIA Country Policy and Institutional AssessmentCSA civil service and administrative reformCSR civil service reformCSRP Civil Service Reform Program (Ethiopia)DAC Development Assistance Committee (OECD)DFID UK Government’s Department for International

DevelopmentECA Economic Commission for AfricaECDPM European Centre for Development Policy ManagementEU European UnionHR human resourcesHRM human resources managementIEG Independent Evaluation Group (World Bank)IIEP International Institute for Educational PlanningMDGs Millennium Development GoalsMOE Ministry of EducationNGO non-governmental organizationNPM new public managementOECD Organisation for Economic Co-operation and

DevelopmentPIDE Pakistan Institute of Development EconomicsPRP performance-related payROM Results Oriented Management SASE Selected Accelerated Salary EnhancementSida Swedish International Development Cooperation AgencySPA Special Program of Assistance for Africa


8

List of abbreviations

STD sexually transmitted diseaseUK United KingdomUN United NationsUNCDF United Nations Capital Development FundUNDESA UN Department of Economic and Social AffairsUNDP United Nations Development ProgrammeUNESCO United Nations Educational, Scientifi c and Cultural

OrganizationUNRISD United Nations Research Institute for Social

DevelopmentWB World BankWBI World Bank InstituteWHO World Health Organization


9

LIST OF FIGURES

Figure 2.1 Analytical framework for organizational change 41Figure 2.2 Public sector reform cycle 43

LIST OF BOXES

Box 1. Typology of incentives 34Box 2. Levels of incentives and motivational factors I 38Box 3. Levels of incentives and motivational factors II 38Box 4. Levels of action and intervention strategies 39Box 5. Types of and tools for change management 43Box 6. Reasons for and types of pay reform 69Box 7. Organizational performance: major objectives and

incentives 80


11

FOREWORD

Capacity development is a fundamental part of the mandates of many international organizations. Much of their work aims to strengthen national capacities through training, technical advice, exchange of experiences, research, and policy advice. Yet there is considerable dissatisfaction within the international community regarding the impact of many such interventions. The activities have usually strengthened the skills of individuals, but have not always succeeded in improving the effectiveness of the ministries and other organizations where those individuals are working. These shortcomings demand investigation in order to strengthen capacity development policies and strategies.

In this context, UNESCO received funds from the Norwegian Ministries of Education and Foreign Affairs to focus on ‘capacity development for achieving the Education for All goals’. The objective was to identify appropriate strategies for UNESCO and others. Within UNESCO, IIEP has coordinated this work. A wide range of activities was undertaken, including detailed case studies on three countries (Benin, Ethiopia and Vietnam), a series of thematic studies and literature reviews, and consultations with experts. The focus has been on educational planning and management as stronger capacities in these areas should lead to important improvements in the education system as a whole.

IIEP’s work has led to the identifi cation of some main principles:

• The type of capacity development being considered here only works in a sustainable manner when there is national leadership and ownership, and when international efforts match national priorities and strategies.

• Strategies need attention at several levels: the capacities of the individual, the effectiveness of the organization (for example the ministry of education), the norms and practices which rule public management as a whole, and the political, social and economic contexts.

• Any intervention must recognize the intrinsic values of ownership and participation. When it aims only to identify partners’


12

Foreword

weaknesses or to strengthen the positions of those already powerful, the deepest sense of capacity development is lost.

The series Rethinking capacity development has been prepared within this framework.

Mark BrayDirector

UNESCO International Institute for Educational Planning (IIEP)


13

SUMMARY

Incentive structures play a crucial role when it comes to capacity development by motivating individuals and targeting organizational performance. Practitioners and academics have recently given more and more attention to incentives issues – presented by a number of authors as the missing link in development. This literature review takes a closer look at how incentives are linked to motivation, performance and capacity development. The interplay between incentives and training is equally addressed. Chapter 2 of the review presents a typology of incentives, the different levels of analysis, and more general frameworks linked to capacity development. This publication emphasizes the distinction between fi nancial and non fi nancial incentives that target merit and accountability, and the importance of organizational culture. While recent literature draws the conclusion that incentives matter, incentive schemes do not always contribute to improved public performance, and may even represent an obstacle to capacity development. Chapter 3 attempts to identify the reasons linked to the failure of incentives in particular, and of public sector reform in general, including civil service reform. The limited impact of many incentives schemes is linked to competing disincentives leading to capacity erosion, such as sustained low wage levels, lack of transparency in recruitment or promotion based on political affi liation. The lack of knowledge about effi cient use of non-fi nancial incentives and human resources management tools, and the distorting effects of donor presence, are additional reasons for failure. When it comes to public sector reform, political will, existing capacity level, as well as the scope and sequencing of reform are crucial elements. Chapter 4 presents several relatively successful approaches to incentives. A number of these initiatives target not only performance, but accountability, team spirit or other organizational ‘intangibles’ that may have a positive impact on performance in the long run. Finally, Chapter 5 presents an overview of the general recommendations formulated by international agencies and various authors. An annotated bibliography follows, on which the literature review is based.


15

RÉSUMÉ

Les structures d’incitations jouent un rôle crucial dans le développement des capacités par le biais de la motivation des individus et de la performance des organisations. Ces dernières années, les praticiens et les universitaires consacrent de plus en plus d’attention aux questions liées aux facteurs incitatifs – présentés par nombre d’auteurs comme le maillon manquant dans le développement. Cette revue de la littérature examine de plus près les liens qui existent entre ces facteurs et la motivation, la performance et le développement des capacités. L’interaction entre les facteurs incitatifs et la formation est également évoquée. Le chapitre 2 de la revue présente une typologie de ces facteurs, les différents niveaux d’analyse et les cadres d’analyse plus généraux liés au développement des capacités. La distinction entre incitations fi nancières et non fi nancières, qui ciblent le mérite et la responsabilisation, et l’importance d’une culture organisationnelle, sont parmi les aspects mis en exergue. La littérature contemporaine sur les incitations souligne leur impact potentiel. Cependant, les structures d’incitations ne contribuent pas toujours à améliorer la performance publique, et peuvent même constituer un obstacle au développement durable. Le chapitre 3 tente d’identifi er les raisons liées à l’échec des incitations en particulier, et à l’échec des réformes du service public. L’impact limité des structures d’incitation est lié aux incitations négatives qui contribuent à l’érosion des capacités, comme par exemple un constant niveau de bas salaires, l’absence de transparence dans le recrutement, et des promotions basées uniquement sur l’affi liation politique. La non-utilisation des incitations non fi nancières et des outils de management de ressources humaines, et parfois les effets pervers de la présence des donateurs sont d’autres raisons importantes. Quant aux réformes du secteur public, la volonté politique, le niveau existant de capacités, ainsi que la couverture et l’ordre des réformes sont des éléments cruciaux. Le chapitre 4 présente ensuite un certain nombre d’initiatives relativement réussies dans le domaine des incitations. Celles-ci ne ciblent pas seulement la performance, mais la responsabilisation, l’esprit d’équipe ou d’autres aspects organisationnels « intangibles » qui peuvent infl uencer la


16

Résumé

performance sur le long terme. En guise de conclusion, le chapitre 5 dresse un panorama des recommandations formulées par des agences internationales et d’autres auteurs. Le document est suivi d’une bibliographie annotée sur laquelle est fondée la revue de la littérature.


17

INTRODUCTION

This detailed literature review of incentives for civil servants builds upon an annotated bibliography, in addition to seven interviews conducted at the IIEP in June 2008. Five of the selected interviewees were public offi cials working in the ministry of education (MOE) in their respective countries of Burkina Faso, Senegal, Tanzania, Cambodia, Madagascar, and Saint Vincent and the Grenadines. At the time of the interviews, the interviewees were participating in the IIEP’s Master’s programme in educational planning and management, the Advanced Training Programme (ATP). The interviewees will hereafter be referred to as the ATP participants. For a detailed overview of the questions and areas of inquiry discussed during the interviews, see Annex 1. The remaining two interviewees were IIEP professionals with extensive fi eld work experience and knowledge of a number of issues linked to incentives. The selection of interview subjects provided a heterogenic yet small sample. Consequently, the fi ndings cannot be generalized to the wider universe of MOE civil servants, but may serve as empirical, comparative examples of the various issues and arguments identifi ed in the literature. While devoting specifi c attention to the education sector, the review also draws examples and inspiration from other sectors and from more general studies. The interviews proved particularly useful in enriching the literature review with specifi c examples from the education sector, since the literature on incentives is rarely sector-specifi c. The relatively general nature and use of incentives allow this type of literature to provide insights that remain valid for the public administration as a whole, and across sectors.

The literature review is organized as follows: Chapter 1 presents the rationale, explaining and justifying the interest in incentives, and presents the notion of incentives in more detail. The linkages between incentives, performance and the ultimate goal of capacity development are identifi ed and make it obvious that incentives matter. Considering incentives implies expanding the notion of typical capacity development modalities beyond that of training. The relationship between incentives and training is therefore explored further. Chapter 2 provides an overview of the different types of incentives that are mentioned in the


18

Introduction

literature, with specifi c attention to the distinction between fi nancial and non-fi nancial incentives. A typology of incentives is elaborated using the different levels of analysis (individual, organizational, institutional and context-related incentives). The different types of incentive models and frameworks that link incentives to capacity are identifi ed and presented. Chapter 3 presents the explanatory factors linked to the limited impact of past and present incentive schemes. The section analyses two aspects of the debate. The fi rst aspect deals with the weaknesses of incentives. In other words, why do they fail to motivate staff? The importance of incentives has been recognized for a long time. However, the situation has not changed much and reforms in the 1980s and 1990s have not led to an improvement. The second aspect of the debate deals with reform efforts in the area of civil service, and identifi es the main reasons for their failure or counterproductive effects. Chapter 4 provides an overview of recent reforms, best practices and innovative approaches. The reasons for their relative success and further challenges are identifi ed. Finally, Chapter 5 summarizes the various policy recommendations proposed by international agencies and individual authors. These recommendations resume the issues discussed throughout the literature review and provide some concluding remarks.


19

1. RATIONALE

Incentives, public performance and capacity development: a chain of causality

The ultimate role of incentives in developing countries is to promote, via its impact on enhanced public sector performance, the objective and wider process of capacity development in the public sector. The correlation between effective public institutions and capacity development is well known. The importance of incentives is linked to their impact on the very same chain of causality: incentives with motivational effects infl uence public sector performance, which in turn is decisive for poverty reduction and economic growth (UNDP, 2006a).

The link between incentives and public sector performance implies a focus on the human dimension of public sector organizations, namely the civil service. Public sector organizations are made up of people. Incentives recognize that individual change is a necessary condition for organizational change. Effective institutions are due to the effective use of individual skills, which occurs when individuals align their proper goals with that of the organization they work for. Incentives thus represent the various ways of aligning individual and organizational interests. In other words, an incentive is a tool used to trigger a motivational reaction – that is, a change in human behaviour. The overall objective of this change is to promote enhanced performance. Mathauer and Imhoff (2006: 3) defi ne motivation as “the willingness to exert and maintain an effort towards organizational goals”. Incentives often include measures that create competition and accountability, such as merit-based pay and promotion, evaluations and a transparent work environment. Generally, incentives should correspond to the objective of fostering a high-performance public service that attracts, retains and motivates competent staff (World Bank, 2008a: 6).

In the literature on incentives, the 1997 World Development Report – The State in a Changing World – is often cited as a key document in the fi eld as it links incentives and the civil service to the wider objective of development: The report places the state at the centre


20


of development, identifi es the civil service as the main instrument for the state, and recognizes the connection between the major incentive of merit appointments and bureaucratic capability (1997: 79-99; Olowu, 1999: 1). The World Public Sector Report 2005, published by the UN Department of Economic and Social Affairs, also underscores the link between a merit-based bureaucracy and economic growth and poverty reduction. The Development Assistance Committee (DAC) (2006) has listed the establishment of positive incentives as a default principle for capacity development. In this respect, the third book in the UNDP series on capacity development, Ownership, leadership and transformation: can we do better for capacity development?, makes a pertinent point: “Perhaps the most critical form of support for capacity development is an effi cient, transparent and accountable public administration, partly because a signifi cant portion of all development work takes place in this system” (Lopes and Theisohn, 2004: 97). Interpreted as a default principle for capacity development, incentives contribute to the creation of an effi cient, transparent and accountable public service, and thus, to the wider process of development.

Incentives are evoked not only as an important tool in order to build and sustain capacities, but also as a central part of the ongoing and much-needed civil service reform efforts that take place in many developing countries (Morgan and Baser, 2007). Ul Haque (2006) from the Pakistan Institute of Development Economics recalls the evolution of the development discourse in order to situate the issue of civil service reform (CSR) within the present paradigm: the structural adjustment programmes of the 1980s focused principally on macro-economic stability and downsizing. The more recent approaches to civil service reform, however, recognize the importance of the quality of public institutions for development, as refl ected in most of today’s public reform programmes.

The focus on public sector organizations is nothing new within the capacity development perspective. Over the past few years, however, both governments and donors are increasingly paying attention to the linkages between incentives, civil service reform and development. The World Bank is no exception. It argues that the objective of fostering a high-performance public service is a central part of civil service and administrative reform and thus of public sector reform, along


21

Rationale

with issues related to public expenditure and fi nancial management, tax administration and anti-corruption. Taken together, their ultimate desired impact is economic growth, reduced poverty, security of life and property, participation and empowerment of people, and improved quality of and access to public services (World Bank, 2008a: 6). In this respect, it is interesting to note that some authors do not consider civil service reform as an integral part of public sector reform. They conceive of civil service reform rather as an instrument preceding public sector reform, since no reform can be implemented without the effi cient management of human resources already in place and able to accommodate such reform (Mengistu and Vogel, 2006). If this is not the case, the civil service becomes an obstacle to capacity development.

Public capacity erosion and the limited impact of training: incentives matter

The erosion of developing countries’ public sector capacity, despite donors’ technical assistance programmes, is often referred to as the main explanation for the relatively recent interest in the role of incentives for enhanced public performance. Government ineffectiveness and ‘brain drain’ are identifi ed as the consequences of poor public service conditions and they contribute to the sustaining of a vicious cycle of capacity erosion (OECD/DAC, 2006: 17). On the individual level, negative or perverse incentives within the public sector, such as poor salaries and unjust criteria for recruitment and promotion, have led to capacity erosion. Donor involvement, especially through technical assistance, has focused extensively on the training of civil servants as a major strategy for capacity development. The UNDP, for example, considers motivation an essential aspect of capacity development, but acknowledges that it is often downplayed in comparison with the emphasis put on acquiring new knowledge and capacities at the individual level.

However, the limited impact of ‘typical’ capacity development modalities such as training has made it necessary for practitioners and scholars in both government and donor circles to look above and beyond training. Even when individuals have acquired new skills and knowledge, this does not always translate into enhanced performance in the workplace. As one author puts it, “the problem lies not in the lack


22


of skills, but the lack of strong incentives to use these skills optimally” (Kamoche, 1997: 4). Using the example of Indonesia, another author also warns against looking at training as the whole answer, since “the fundamental problem in Indonesia’s bureaucracy is, for the most part, not a lack of skills but simply the lack of incentives to use them” (McLeod, 2005: 5). A number of authors confi rm that there is great doubt as to whether training actually leads to improved individual and organizational performance, and criticize what Kamoche (1997) refers to as ‘trainingism’ – that is,“a pervasive ideological support for training”.

Nevertheless, the development community, whether it be practitioners or scholars, underscores the importance as well as the complexity of acquiring and applying new knowledge for capacity development. The Economic Commission for Africa (2003) identifi es training as one element of a broader public sector reform strategy that also includes performance contracting, public reporting and citizens’ charters, alongside organizational capacity development efforts, performance management and pay reform. Verheijen (2000) identifi es training as an important contributor to change in the civil service, in addition to legislation (civil service laws may establish transparent systems of employment) and structure. Training is considered an effi cient reform tool as it creates a more coherent civil service, changes mentalities and may create a sense of community among civil servants. However, the transferral of new skills and knowledge is a necessary, but not a suffi cient condition for successful capacity development. Berg (1993) makes the pertinent observation that incentives are conceived of not only as necessary for the application of skills and knowledge in a given situation, but are crucial in motivating civil service employees to participate in training programmes, acquire new skills and actually learn from technical cooperation projects. As emphasized by the World Bank, “capacity development occurs once participants transfer what they have learned to their everyday jobs, and improve their performance” (World Bank, 2008b: 66). For this to happen, one must take into account the additional variables that intervene prior to the actual learning process – that is, the establishment of support for training, and after training, the application of the acquired skills and


23

Rationale

knowledge in the workplace. These intervening variables are incentives that encourage the implementation of individual learning.

Often, learning does not become implemented because of obstacles related to power structures within an organization, entrenched attitudes or a lack of resources (World Bank, 2008b). These obstacles constitute examples of perverse incentives. On the other hand, positive incentive systems may help change and evolve such practices. Well designed incentives encourage individuals to seek out training, motivate them to apply their skills and enhance their performance in the workplace. Incentives may or may not be conducive to capacity development, and the causal relationship between incentives and improved performance is therefore relevant for capacity development. Incentives have been identifi ed as ‘the missing link’ (Ul Haque, 2006) or as ‘the missing sector in sectoral studies’ (McLeod, 2005). The role and functioning of these motivational factors are therefore receiving increasing attention, especially within public sector organizations. In fact, making “incentives and motivation converge in order to create capacity development” is one of the UNDP’s fundamental principles in this respect (Lopes and Theisohn, 2004).

Defi ning, discerning and operationalizing incentives

Theoretically, incentives are situated at the nexus of development theory and human resources management theory. The notion of incentives is multi-disciplinary and draws on additional academic disciplines such as sociology and economics. The various defi nitions of incentives tend to emphasize different yet complementary aspects of the concept depending on the theoretical approach taken and its empirical implications. As mentioned, the overall, cross-disciplinary objective of incentives is identifi ed generally as producing a change in behaviour by introducing a motivating factor for this change. The notion of incentives is often used interchangeably with the notion of motivation, although the former is the cause and the latter the effect. The UNDP makes the distinction clearly when referring to incentives with “motivational effects” (2006a: 6). Motivation is linked conceptually to capacity, which in turn is defi ned by the UNDP as “the ability of people, institutions and societies to perform functions, solve problems and set and achieve objectives” (2006: 5). The World Health


24


Report 2000 defi nes incentives in the health sector in a more detailed manner, as “all the rewards and punishments that providers face as a consequence of the organizations in which they work, the institutions under which they operate and the specifi c interventions they provide” (Adams and Hicks, 2000). This defi nition places the individual, in this case a service provider, within a specifi c public organization and acknowledges the importance of the wider institutional context as well as the specifi c tasks undertaken by the individual. Incentives, in the form of rewards or punishment, may originate from all of these levels and the individual adapts their behaviour according to the nature of these incentives.

As mentioned, incentives generally correspond to the objective of improved performance. However, an increasing number of incentives respond to another objective, namely accountability. Accountability and enhanced performance are interlinked and in practice often overlap, since accountability itself may contribute to enhanced performance. Improving public access to information or establishing transparent rules for human resources management are typical measures aimed at improving accountability, which in turn may motivate civil servants to work more effi ciently (Caiden and Sundaram, 2004: 379). Yet accountability is conceptually distinct because it underscores a normative dimension of capacity development, linked to ‘good governance’ considerations and the values of transparency, equity and encouraging people to become aware of and claim their rights. The World Bank argues that incentives can improve both internal and external accountability, and consequently, contribute to good governance (World Bank Institute, 2007). However, research conducted by the UNRISD (Therkildsen, 2001) implies that policymakers generally put less of an emphasis on incentives aimed at accountability than on those aimed at effi ciency. Nevertheless, the more recent literature refl ects the fact that increased attention is being devoted to accountability issues. Successful initiatives in this area will be discussed and analysed in further detail in Chapter 4 of this review. Internal and external accountability and performance may be interpreted as two sides of the same issue; they constitute the intended effects of incentives. Externally, the public service has to be able to compete with the private sector for skilled human resources, and should be accountable to the public. Internally,


25

Rationale

civil servants should participate in fair competition for rewards and promotion, and be accountable to its hierarchy. This distinction fi nds support in the literature: Caiden and Sundaram (2004: 383) refers to the double objective of a responsive and accountable administration to improve the performance and integrity of the civil service. Adams and Hicks (2000) makes a similar distinction between competition with the aim of effi ciency and accountability for transparency.

The rather theoretical discussion on incentives, public performance and capacity development is complemented by empirical studies that look into specifi c incentives, which will be presented in the next part of this literature analysis. A third strand of the literature on incentives takes an intermediate approach to the subject matter by exploring the different public sector areas and capacity issues that incentives are linked to. The background literature prepared for the African Governance Forum organized by the UNDP (Saasa, 2007) is a case in point. It relates incentives to the various capacity issues of organizational effectiveness, governance, management capacity, human resources, fi nancial resources and service delivery. Within human resources, incentives may be used to retain and attract talent on the global labour market and to encourage local service delivery in remote areas (UNDP, 2006a). Changing incentive systems may thus be part of various reforms within a specifi c public organization, such as specifi c compensation reforms, changes in human resources management (HRM), organizational reforms or demand-side reforms, in addition to the wider civil service and public sector reforms (World Bank, 2008a: 52). Whereas compensation reforms generally deal with pay structures and pensions, HRM deals with merit-based recruitment, promotion and discipline, performance management, and appraisal systems.

Much of the research on civil service incentives in developing countries has been conducted in the form of case studies. This has made it diffi cult to explore systematically the link between incentives and performance, or the types of incentives that are conducive to bureaucratic performance in particular. The study conducted in 1998 by Court, Kristen and Weder (Bureaucratic structure and performance: fi rst Africa survey results) is one of the few quantitative studies that has been undertaken on the subject. Its cross-country fi ndings correspond


26


to those presented in various case studies and confi rm that incentive structures are not bound geographically. In African countries and elsewhere, enhanced performance is linked primarily to organizational autonomy, good career opportunities and good salaries. Key issues included in the survey and in the resulting regression analysis are appointment and advancement based on meritocracy, salary scales equivalent to responsibility, adequate wages, career structure, transparency and accountability. Research on civil service incentives in developing countries confi rms empirically the assumption made by policymakers and human resources managers in developing countries – that incentives matter.


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2. FRAMEWORKS AND TYPES OF INCENTIVES

Financial versus non-fi nancial incentives

The complexity of incentives is linked to their role in predicting and infl uencing human behaviour, since “what encourages people to change is often a very complex and abstract mixture of objectives and expectations, with some elements of concern for society at large, but with a heavy emphasis on individual rewards” (Lopes and Theisohn, 2004: 92). Individual rewards, or benefi ts, are identifi ed by most authors as the main incentive for behavioural change. Financial incentives represent the principal type of incentives used in the public service to reward civil servants, mainly through salaries and monetary allowances. However, in most developing countries, salaries represent a major capacity challenge in that they are too low to attract, motivate and retain civil servants. In some countries, such as Madagascar, ‘everybody’ has two or three jobs in order to make ends meet (ATP participant). The theme of low salaries has been recurrent in the literature, as is the focus on and use of fi nancial incentives. However, most authors agree that the value of non-fi nancial incentives generally has been underestimated, and much of the recent literature devotes considerable attention to this area. Such non-fi nancial incentives are “incentives that involve no direct transfers of monetary values or equivalents” (Mathauer and Imhoff, 2006: 4). The literature emphasizes two main groups of non-fi nancial incentives: (1) merit-based non-fi nancial incentives and (2) incentives that are linked to accountability issues. These correspond largely to the distinction made between performance and accountability as sources for capacity development.

Merit = rewarding performance

For incentives to be motivational, they have to be closely linked to notions of what is equitable, just and fair. Fairness in the working place is linked intrinsically to merit – that is, recognizing, awarding and appraising performance. Merit has generally been interpreted and applied as a fi nancial incentive, matching salaries to individual performance, for example by introducing performance-related pay (PRP). The logic


28


behind PRP is that merit will lead to competition, which will lead to enhanced performance (OECD Observer, 2005). The limited impact of such measures (which will be discussed in Chapter 3), as well as the limited availability of fi nancial resources in many developing countries, has turned the attention of policymakers to non-fi nancial, merit-based incentives. In the absence of basic, reasonable salaries, other factors may assume greater importance. The UNDP maintains that “it is arguable that, at least up to a certain point, low salaries are more likely to be accepted in a system that is commonly regarded as equitable” (Lopes and Theisohn, 2004: 100). Incentives are therefore designed by appealing to a perception of what can be considered just, such as the introduction of transparent, performance-based criteria for recruitment and promotion (Adams and Hicks, 2000). Consequently, in recruitment processes, merit may be translated as “open, ongoing, fair and vigorous competition for all positions, supported by a clear set of rules and provisions for enforcement of those rules” (McLeod, 2005: 9).

McCourt (2001) explores the notion of merit in more detail. He links merit directly to wider organizational goals such as bureaucratic capacity, anti-corruption efforts, individual performance and accountability. Another merit-based, non-fi nancial incentive is the previously discussed use of training. Kamoche (1997) is one of the authors who raises doubt about the use of training as a means to improve individual performance, but recognizes that it is often used as an incentive within the public sector for attracting and retaining staff. In this sense, training is perceived as a merit-based reward for good performance, rather than as a way of promoting and enhancing future performance. Even though enhanced performance may result from the training, it is not always perceived by the participants as the main objective. This is an interesting perspective because it shows how a ‘typical’ capacity development effort may be used as an incentive which is not necessarily conducive to capacity development. The ATP participants emphasized the value of training for promotion. Lopes and Theisohn (2004: 100) confi rm that training programmes may rather be linked to certain ‘perks’ associated with it, such as travelling with expenses covered, than the actual objective of learning. “These practices [...] divert the interest of the remaining staff from their main duties


29

Frameworks and types of incentives

to the possibilities of having access to aid-funded perks”. This was confi rmed by the interviewees. Participating in training, conferences or meetings that involve travel is, in many cases, used as a reward for good performance. This is linked to the generous travel allowances that are often subsidized by donor agencies. In extreme cases, the daily travel allowance may exceed monthly salaries. As a result, “everybody tries to save for their families” when they go travelling (ATP participant). One ATP participant explained that an individual may sometimes be allowed to participate in an English-speaking conference, even though he or she doesn’t speak English. Another interviewee observed that the use of training or travelling as a perk can lead to management problems when it comes to the selection of candidates. In his unit, travelling is used as a perk, which the employees try to share among themselves. Since all training provides a form of perk, it is important to exercise ‘scrupulous transparency’ when selecting participants (UNDP, n.d.: 8).

Accountability = demanding performance

Whereas merit-based incentives are relatively easy to conceptualize, the second type of non-fi nancial incentives relates to the less tangible notion of accountability. The distinction between internal and external accountability is useful in this context. Internal accountability is exercised through control and evaluation, and is primarily a tool for assessing performance, thus it is partly linked to merit. Performance management is one example of such HRM tools. External accountability is about holding public organizations responsible and accountable to the public. Empowering citizens by giving them increased access to information (transparency) and the power to discuss, criticize and infl uence public action is normally encouraged in a rights-based approach to development. However, it may also improve performance by putting pressure on civil servants to do their job effi ciently and according to rules and regulations. In this sense, external accountability works as a civil service incentive, albeit in an indirect manner. Citizens’ charters, public complaints arrangements, service delivery surveys and user charges are examples of initiatives that specifi cally widen and strengthen the public’s opportunities for ‘voice’, multiplying the accountability points of a public organization (Therkildsen, 2001: 41).


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The right mix of incentives

Much of the literature seems to draw the same conclusion, that salaries and similar fi nancial incentives constitute a necessary, but not suffi cient, condition in order to create motivation for enhanced performance. More money does not automatically lead to better performance. Several studies have illustrated the limited impact of fi nancial incentives, especially in the health sector, where conscience, vocation and professional ethos are important motivational factors (Mathauer and Imhoff 2006). Grindle and Hilderbrand’s study on the performance of public organizations fi nds that “while higher salaries may have contributed to better performance in some cases, this factor did not strongly differentiate between the categories of performance” (1997: 484). Whereas non-fi nancial incentives are attributed an important role in the public sector in general, values such as vocation and ethos may be particularly important for service providers such as the health or education sector. However, the limited research on incentives in the education sector makes it diffi cult to fi nd empirical support for this hypothesis. Most of the ATP participants that were interviewed did tend to agree with the view that non-fi nancial incentives matter beyond a certain minimum salary level. Several of them made reference to Maslow’s hierarchy of needs in order to illustrate the importance of fi nancial incentives to meet the basic needs. Once these are met, other factors such as esteem needs and self-actualization become important. One IIEP professional made reference to the situation of teachers in Senegal, who are relatively well paid and still have two or three jobs on the side. This goes to show that adequate fi nancial incentives do not necessarily translate into enhanced motivation. The interviewee listed work environment, general living conditions and career prospects (based on performance, not seniority) as crucial motivational factors. In general, participants coming from the poorest countries emphasized more strongly than the other participants the need for decent salaries. Only one of the ATP participants mentioned professional vocation as a motivational factor for joining the Ministry of Education (MOE). Among the ATP participants, the reasons for joining the MOE were various. Many of them were originally teachers and career prospects are naturally oriented towards the MOE. Others had passed the public selection competition for becoming a public servant and were placed in


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or transferred to the MOE. Professional conscience, however, did seem to score highly among the interviewees. As one participant said, she could probably get a better paid job working for a donor agency upon completion of the IIEP training programme, but chooses to go back to the ministry. In general, the job security and pensions provided by the public sector are greatly appreciated by civil servants. One participant did mention the possibility of leaving the public sector, because of limited career prospects within the MOE.

The distinction between fi nancial and non-fi nancial incentives is important theoretically, but in practice, most public organizations include a range of both kinds of incentives. Non-fi nancial incentives include various measures such as technical upgrading, career development, unpaid holidays, equal opportunities for training and active staff participation in decision-making. Incentives may also be less tangible, such as team building, morale boosting, prestige, work environment, changes in management structure, good leadership and a sense of meaning (Adams and Hicks, 2000). The work environment was perceived as an important motivational factor for the ATP participants. Being able to work with important people at a high level within the MOE – “working close to the bosses”, as one participant put it – was emphasized by three interviewees. Recognition, constructive feedback from superiors and training opportunities were also perceived as motivating. Grindle and Hilderbrand (1995: 444) argue that training focused on skills and technology may be less motivating than actually being able to use the skills in a meaningful way and so being able to contribute to the organization’s work. The European Centre for Development Policy Management’s case study of capacity issues in Tanzania’s public sector (Morgan and Baser, 2007) fi nds that the public sector reform process actually gave staff a sense of meaning, which proved to be more important in fostering motivation and responsibility than fi nancial incentives. This is interesting because it provides an empirical example that goes against the conventional wisdom of fi nancial incentives as key to increased capacity and performance. According to Adams and Hicks (2000: 4), self-actualization, a sense of achievement, recognition, responsibility and the quality of personal relationships in the workplace are important sources of motivation. Consequently, “there is a special need for research into incentives


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that seek to affect personal motivation rather than simply elicit an economic response” (2000: 5). In general, the challenge for public organizations is to “establish an optimal mix of fi nancial and non-fi nancial incentives that generate the desired behaviour” (Hongoro and Normand, 2006: 1313). Van Lerberghe, Conceição, Van Damme and Ferrinho (2002) suggest that such a ‘mix’ consists of introducing incentives that are coherent with the organization’s goals and provide public servants with fi nancial compensation, a clear sense of purpose and recognition.

A typology of incentives and additional levels of analysis

Many of the incentives mentioned so far have been referred to as intangible or indirect, and often non-fi nancial, such as career concerns, performance measurement and evaluation. Incentives also include many common HRM tools that may affect motivation, but in a more indirect manner as they do not target the individual directly but the organization as a whole. They may aim for individual motivational effects, but through changes in the organization or the wider institutional framework in which the individual is situated. The distinction between what most authors refer to as individual incentives on one hand, and organizational incentives on the other, is therefore central. Much of the recent literature on human resources management focuses on organizational incentives, as they are relatively novel in their use and may prove to have a greater impact than traditional individual incentives.

Organizational incentives are defi ned by the UNDP as “the reason for staff to join an organization, and the way an organization rewards and punishes its staff” (UNDP, 2006a: 8). It is a relatively straightforward defi nition which Grindle and Hilderbrand (1997) take one step further by identifying and presenting the concept of organizational culture. The authors refer to organizational culture as the ‘missing ingredient’ in the literature on organizational performance, and argue that it may explain why some organizations perform better than others. Organizational culture is defi ned as “a shared set of norms and behavioural expectations characterizing a corporate identity” (1997: 491). As mentioned, individual incentives temporarily align an employee’s interest with that of the organization. This alignment


33


may be conceptualized as a psychological contract of sorts between the individual and the organization (Adams and Hicks, 2000: 4). According to Grindle and Hilderbrand, certain organizational incentives go beyond the alignment phase and strive to make individuals internalize the organization’s goals. Consequently, these incentives are much more ‘powerful’ because individuals may adopt the organization’s goals, consider them their own, and enhance their performance in order to reach these goals.

In their study, Grindle and Hilderbrand fi nd that the “characteristics associated with positive organizational cultures, such as mission, performance-oriented managerial style, and autonomy in personnel matters differentiated those [the public organizations] that performed well from those that did not” (1997: 482). The organizational mission may assume the role of incentives by helping employees internalize the organization’s goals. A shared mission is linked to a “mystique about the organization and the importance of the task it was performing”, making employees consider themselves vital contributors to the accomplishment of this task (1997: 486). Clear and applied performance standards, linked to rewards and recognition, also contribute to organizational performance. In addition, autonomy is a facilitating factor, leaving room for an organization to develop its proper culture, both in terms of its mission and its performance standards: “When successful organizations had the capacity to manage incentives for good performance, they promoted and recognized the achievements of their employees” (1997: 490). Bana and McCourt (2006: 406) confi rm that the civil service seems to be more effi cient when it is somewhat autonomous, allowing public organizations to foster capacity and confi dence. According to Grindle and Hilderbrand (1997), promoting these organizational characteristics is vital when aiming for improved organizational performance through civil service reform. On the other hand, the organization’s tasks, salary level and client demand and oversight fi nd little or no support for organizational performance in Grindle and Hilderbrand’s study (1997). Other authors, such as Ul Haque, give additional examples of organizational incentives such as teamwork and dialogue. In Singapore, so-called Work Improvement Teams allowed groups of staff to discuss openly the obstacles to quality and solutions for service improvement (Ul Haque, 2006: 26). One ATP


34


participant proudly explained how she and a colleague had actively contributed to changing the work culture in their unit by emphasizing the values of teamwork and team spirit.

Nevertheless, what Ul Haque (1999: 472) refers to as formal incentives on the individual level remain important tools for motivating self-interested agents. The two types of incentives, individual and organizational, are therefore kept separated in most typologies. In order to provide a complete list of the incentives identifi ed in the literature, it is useful to present a typology based on the ones elaborated by authors such as Ul Haque (1999), Hongoro and Normand (2006), Adams and Hicks (2000), Mukherjee and Manning (2000), and Mathauer and Imhoff (2006). These authors make the distinction between individual and organizational incentives on one hand and fi nancial and non-fi nancial incentives on the other. When it comes to organizational incentives, a further distinction is made between internal and external incentives, the former referring to the internal functioning of an organization, and the latter relating the organization to its external environment.

Box 1. Typology of incentives Individual incentives

Financial incentivesPay Base wage/salary

BonusesStock options

Other direct fi nancial benefi ts

InsurancePensionAllowances (transportation, housing, telephone, meals, travel)Material (computer, Internet, equipment, air conditioning)

Indirect fi nancial benefi ts

SubsidiesChild careTraining

Non-fi nancial incentivesJob securitySocial privilegesReputationRe-employment after retirementHolidaysFlexible working hoursSabbatical


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Study leavePlanned career breaksCounsellingRecreational facilities

Organizational incentivesFinancial incentives

Internal Group-based performance awards and payExternal Benchmarking and competition among organizations (e.g.

health facilities)Non-fi nancial incentives

Internal AutonomySupervision schemesRecognition schemesTraining and professional developmentLeadershipTeam-buildingTransparent and reliable promotion schemesSupportive supervision and feedbackPerformance management toolsStaff participation in decision-making processesHorizontal and vertical communication among staffQuality improvement teams and building a quality cultureParticipatory problem assessments and problem-solving processes

External Accountability schemes: citizens’ charters, service delivery surveys and so on Market exposureFinancial responsibility Governance: transparency, preventive anti-corruption measures, responsibility for decisions Regulatory mechanisms

Source: Adams and Hicks (2000: 5) and Hongoro and Normand (2006: 1311).

Situating the various incentives within the different categories is not always an easy task, as authors tend to place certain incentives in different categories. One such example is training, which can be conceived of as both an individual and an organizational incentive, and as a non-fi nancial incentive and an indirect fi nancial benefi t. Incentives target different and sometimes overlapping levels, depending on the departure point of the analysis: the individual participates in training, but the training programme may be organized by and targeted towards the organization as a whole. The fi nancial aspect lies in the cost of training and the value of the skills acquired by the individual. Many authors do not clarify how they relate incentives to these different


36


levels, whether incentives originate from or target the levels in question. Implicitly, the typologies match the different incentives to concrete motivational factors at different levels. On the individual level, incentives are linked to individual self-effi cacy, goals, values and motives, while organizational determinants may be the work environment and organizational culture.

Some authors take the analysis one step further and identify at least one, and often two, additional levels – an institutional level and the context level. These levels may indirectly create incentives for performance for individuals and organizations, such as institutional and cultural norms and values (Hongoro, 2006: 1311). They may also interact with motivational factors on other levels. It is therefore important to consider the wider context in which public organizations are situated and in which incentives are implemented. McCourt (2006a) emphasizes in this respect the need for ‘thick’ descriptions of political, economic, social and historical variables. The example of staff management is a case in point: talking about this issue exclusively in management terms is not suffi cient, since there is no such thing as politics-free public management. And vice versa – politics alone cannot successfully implement reforms. A comprehensive approach to incentives reform must take into account the interaction between the micro level (HRM), meso levels (policy and strategy), macro level (institutions), and meta level (politics). According to McCourt, the meta level of politics is paramount:

Talking about staff management in purely management terms is inadequate. Whether the problem was the general preference for reacting rather than initiating, as in Morocco, or an absence of political will deriving from the ‘dual’ system of government, as in Swaziland, or the existence of a patronage system which politicians and offi cials feel obliged to stoke, as in Sri Lanka, all three cases had one thing in common: the failure of management reform had its roots in the political system (McCourt, 2006a: 25).

Frameworks of public performance and capacity

Several models and frameworks are presented in the literature in order to illustrate how public performance and capacity may be analysed. These frameworks generally include the presented levels of


37


analysis, their interaction, how various factors at different levels of analysis infl uence incentives, and how these in turn infl uence human behaviour. Three types of frameworks may be identifi ed. They all focus on public performance, but differ in their approach to incentives:

1) The fi rst group is represented by level-type frameworks that aim specifi cally for a better understanding of incentives and the motivational factors they rely on. They build upon the different levels already presented.

2) The second type refers to models that attempt to illustrate how various variables and levels interact and infl uence each other, and how they contribute to the overall objective of capacity development. These variables may have an impact on individual and organizational performance, functioning as indirect incentives.

3) The third type illustrates the all-encompassing process of capacity development in which incentives play an important role. The process is traced over time and is representative of many public sector reform processes.

In order to illustrate the three types of frameworks, a few examples by some key authors have been chosen.

Type 1

Adams and Hicks (2000: 5), and Hongoro and Normand (2006: 1311) present two overlapping models that are useful in order to conceptualize the different levels of motivational factors. They are both elaborated in relation to health sector reform, but may prove useful in other sectors as well. The health sector is an area in which the work on incentives is relatively recent, yet vast. Despite a few sector-specifi c issues, many of the challenges related to incentives are the same as in the education sector, such as providing effi cient service delivery in rural areas.


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Box 2. Levels of incentives and motivational factors I Individual-level determinantsOrganizational context Salary

Benefi ts Clear and effi cient HRM systemsFeedback about performanceAvailability of materials and facilitiesOrganizational norms and practices (culture, management and leadership)

Social and cultural context Community expectations and feedbackSocio-economic contextTechnology

(Health) sector reform Policy contextLevel of bureaucracy and decentralizationCommunication and leadership Congruence with personal values of workersFunding and regulatory arrangement Political commitment

Source: Adams and Hicks (2000: 5) and Hongoro and Normand (2006: 1311).

Mathauer (2004: 3-4) makes a similar distinction between different levels of motivational determinants and processes that infl uence the motivational consequences of job performance and work satisfaction:

Box 3. Levels of incentives and motivational factors IICultural determinants Cultural norms and valuesOrganizational determinants Work environment, organizational culture, HRM

toolsIndividual determinants Goals, values and motives, personality, self-effi cacyMotivation (job performance and work satisfaction)

‘Will do’ Congruence between personal and organizational goals, vocation and professional conscience

‘Can do’ Motivational effectiveness, self-effi cacy, the extent of individual resources that are mobilized to accomplish adopted goals

Source: Mathauer (2004: 3-4).

Motivation is divided here into two internal dimensions – ‘can do’ and ‘will do’. The ‘can-do’ dimension responds to the question “how likely am I to achieve the desired level of job performance?” The


39


‘will do’ dimension relates to the question “what is the personal value of devoting more of my resources to the job or achieving higher job performance?” The study fi nds that the ‘will do’ dimension is stronger in explaining health workers’ motivation and that it affects the ‘can do’ dimension (self-effi cacy). The two-dimensional concept of motivation implies that “HRM tools have the dual task to promote health workers’ professional ethos and commitment, and to strengthen their perception of self-effi cacy” (Mathauer and Imhoff, 2006: 14).

Type 2

Grindle and Hilderbrand (1995) have elaborated a broader framework aimed at identifying capacity gaps and designing intervention strategies for building sustainable capacity in the public sector. The framework assists the identifi cation of factors that constrain or facilitate the ability of public organizations to perform their development tasks effectively, effi ciently and in a sustainable manner. The measured outputs are therefore effectiveness, effi ciency and sustainability. The analytical framework has fi ve levels, starting with the overarching action environment, followed by the institutional context of the public sector, the task network, the organization and its human resources. Constraining or facilitating factors are identifi ed on each level:

Box 4. Levels of action and intervention strategiesHuman resources Training, recruitment, utilization, retentionOrganization Goals, structure of work, incentive system,

management/leadership, physical resources, formal and informal communications, behavioural norms, technical assistance

Task network Communication and interaction among organizations

Public sector/institutional sector Concurrent policies, public service rules and regulations, budgetary support, role of the state, management practices, formal and informal power relationships


40


Action environment Economic factors Growth, labour market, international economic relationships and conditions, private sector, development assistance

Political factors Leadership support, mobilization of civic society, stability, legitimacy, political institutions

Social factors Overall human resources development, social confl ict, class structures, organization of civic society

Source: Grindle and Hilderbrand (1995).

By assessing capacity gaps empirically at these given levels in a number of public organizations, the authors demonstrate that the traditional focal points for public performance need to be called into question. For example, in many organizations, the political, economic and social context will continue to hinder organizational effectiveness despite attempts at organizational strengthening. Factors in the action environment, such as a low level of human resources development and social confl ict, may constitute critical dimensions for capacity development. Consequently, Grindle and Hildebrand (1995: 461) argue that interventions aimed at enhancing the performance of public organizations, such as incentive systems, “need to be strategic; they need to vary and be sensitive to the inter-relationships among the different dimensions of capacity sketched out in the framework”.

The European Centre for Development Policy Management (Morgan and Baser, 2007) has elaborated a similar analytic framework, which serves as the point of departure for the project Capacity, Change and Performance, commissioned by the Network on Governance and Capacity Development of the OECD. The framework’s focus is on the organizations that undergo change – that is, reform – with the goal of building capacity and improving performance. It consists of three overlapping core components: performance, capabilities, and endogenous change and adaptation. These core variables are infl uenced and shaped by four additional components: the external context, external intervention, stakeholders, and internal features and


41


resources. Incentives generally target the core variable of performance, but may also have an impact on an organization’s endogenous change and adaptation – that is, the effectiveness of the capacity development process. Like most other frameworks found in the literature on incentives and capacity development in general, the framework takes into account external factors such as context, actors and interventions. These factors infl uence and are infl uenced by internal features and resources, such as structures, resources, culture, strategies, values and formal and informal roles. Most individual and organizational incentives may be placed within this category. They infl uence the core components and are in turn infl uenced by the other components: the external context, external interventions and involved stakeholders are part of the institutional and systemic levels and may shape and create incentives, for example by imposing demands of accountability or better performance.Figure 2.1 Analytical framework for organizational change

Capabilities

Endogenouschange andadaptation Performance

Internalfeatures andresources

Externalcontext

Stakeholders

Externalintervention

Source: The European Centre for Development Policy Management (Morgan and Baser, 2007: preface).


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Type 3

Finally, in the brief entitled Public sector governance reform cycle, the World Bank Institute (2007) introduces a framework for assessing the capacity gaps in the public sector, and for designing the tools and incentives necessary in order to fi ll the gaps and strengthen public sector capacity and accountability. The cycle consists of fi ve consecutive phases and is particularly useful for analysing and introducing reform processes. It is more process-oriented than the previously presented frameworks. For each cycle, examples are given of relevant tools that are in use or under development. It can thus help users identify the different tools that have been elaborated by the World Bank, understand governance problems and develop proper strategies to address them. All of the steps imply taking into account the relevant variables at different levels and relative to issues of governance, politics and stakeholders. In this sense they correspond to the multiple-level analyses emphasized by the other frameworks. The cycle may be applied to a variety of tools and contexts, such as incentive systems in the context of civil service reform (2007: 7).

The last phase, which may result in an adjustment of the reform process, is followed by going back to step one. In practice, this implies constant evaluation and analysis of the reform process.

The UNDP (2006b) presents a typology of change interventions that illustrates the different types of reform generally used, such as top down, transformational and strategic. The challenge is to manage these types, successfully applying them to a concrete context. However, within the development context, there is little knowledge of change management and the related issues of constraints embedded in bureaucratic systems. Such change processes therefore need to be mapped out step by step and be consulted on in order to reach consensus around a given reform. The authors look at different tools for managing change in two decisive phases:


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Box 5. Types of and tools for change managementChange management phases Implications/tools

1) Managing the environment of change Creating a momentum for change and assessing the change context

2) Executing the change process:facilitating change and communicating about change

Advocacy activities, visioning, empowerment and voice, stakeholder analysis, consultations, leadership, brainstorming, and measuring and celebrating progress

Source: UNDP (2006b: 9).

Figure 2.2 Public sector reform cycle

Identifying relative strengths and weaknesses in public sector management and institutions at the country level and create awareness (e.g. weakness of incentive systems)

1

Assessing the scope for political change and reform (commitment, constraints and risks) – that is, considering how various factors at different levels sustain or menace the present incentive systems

2

Problem specifi cation and the design of reform: identifying underlying problems and the unique conditions of the country; design feasible reform options for specifi c local settings

3

Managing the politics of reform and ensuring sustainable implementation: since the winners and losers in reform may infl uence reform outcomes, stakeholder preferences and behaviour should be assessed. Reform should be implemented in a participatory manner: civil service reform needs to be supported by civil servants

4

Monitoring and evaluating the results and adjusting the reform process (scorecards, surveys)

5

Source: World Bank Institute (2007: 2).


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Embedding change messages in social and organizational culture is one of the UNDP’s guiding principles, since organizational culture (in which employees often lack the incentives of innovating) often is a decisive determinant of the direction and pace of change.

As many authors argue, such schemes are rarely followed step-by-step in actual reform processes. However, this does not make them useless. In fact, they provide useful tools for analysing the changes and challenges linked to incentives for civil servants in the public sector of developing countries over the past few years in that incentive schemes may be identifi ed and analysed according to the level of motivational factors and determinants they correspond to (type 1), the constraining or facilitating factors on each level (type 2), and according to their evolution and management as part of broader reform processes (type 3). The challenges related to improving performance through the use of incentives may be analysed usefully by comparing them with and referring to these frameworks.


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3. CHANGES AND CHALLENGES

Dual explanation for the limited impact of incentives

The civil service’s performance depends on the performance of the individuals it employs. Their performance depends, in turn, “on the incentives they face and on the capabilities relative to the jobs they are required to do” (McLeod, 2005: 9). The importance of incentives for public sector performance and ultimately, for capacity development, is well established. However, the situation in many developing countries is characterized by capacity erosion, poor public sector performance and weak incentives for civil servants. Real-life incentive schemes often deviate more or less radically from the ideal types identifi ed in the theoretical strand of the literature, as outlined in the fi rst two parts of this analysis. In fact, the UNDP argues that “the incentives structures of public administration in most developing countries are known for their counterproductive effects on staff morale and effi ciency” (Lopes and Theisohn, 2004: 99). Many of the public sector reforms implemented throughout the 1980s and 1990s have not led to any improvement. In fact, many incentive schemes have contributed actively to the capacity erosion that has taken place in the public sector despite frequent reform initiatives over the past few decades.

The limited impact of incentive schemes and the failure of reform processes have received much attention in the literature on incentives. Whereas many authors focus exclusively on the issue of incentives, others choose to describe and analyse, most often through case studies, wider public sector reform issues. In this context, incentives are considered an element of civil service reform. The many explanations identifi ed in the debate about why incentives fail illustrate the complexity of the issue at hand. These explanations generally relate to two complementary aspects of the use of incentives in developing countries:

1) The fi rst aspect relates to the content side of incentives – that is, how incentives function and how they are designed to link motivation to performance. The key question is the following:


46


What are the weaknesses of present incentive systems and why do they fail to ‘motivate’ staff?

2) The second aspect deals with the actual implementation of incentives – that is, the chosen strategy of and approach to reform. The key question is: Why have reform efforts in this area failed or been counterproductive?

Authors tend to emphasize one of these two issues. A few, however, recognize that they are complementary. The World Bank (2008a: xvi) is a case in point. It recognizes that “the frequent failures of civil service and administrative reform (CSA), despite continued acknowledgment of its importance, seem to refl ect the lack of a coherent strategy and of clear diagnostic tools to address CSA issues”. Olowu (1999: 8) supports this argument by claiming that “their [civil service reforms] diagnosis and prognosis are both faulty, but so also have been their strategies of reform implementation”. This section on changes and challenges refl ects the dual explanation for the limited impact of incentives by elaborating separately the main elements associated with each of them.

Weaknesses of present incentive systems

Scholars and practitioners generally include several variables in their analysis of the limited impact of past and present incentive systems. The various explanations may be categorized according to the main emphasis of their argument. The fi rst category includes explanations that consider incentive systems too weak and the disincentives too important to contribute to capacity development. The second emphasizes the lack of knowledge about how incentives really work, while the third underscores the importance of matching incentives to the specifi c context in which they are being implemented. In short, incentives are generally perceived as being too weak, poorly understood or poorly adapted to the situation in a given country.

Disincentives and capacity erosion

Descriptive case studies of the civil services, public sector employment and pay reform constitute an important strand of the literature. The focus is primarily on inadequate fi nancial incentives


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Changes and challenges

on the individual level (mostly in terms of salary), both as a cause and a consequence of public sector capacity erosion. Most authors trace the process of capacity erosion back to the 1970s, when public sector employment was actively used as a tool to counter high rates of unemployment and was privileged over income growth of public employees (Lopes and Theisohn, 2004: 99). Overstaffi ng made it impossible to sustain salary levels and led to a dramatic fall in wages, followed by attempts at staff reduction and at decompression of differentiated salary levels in many countries. Increasing civil service salaries remained a marginalized or failed objective throughout the 1970s and 1980s. Ul Haque makes the observation that salary decline has been the most severe in the poorest countries (2006: 8). Berg (1993: 204) argues that the wages of skilled professionals fell more than those of unskilled workers. This, in turn, symbolized the growing “divorce between effort or responsibility and reward: the amount of salary received by employees is less and less determined by the importance of their contribution to the functioning of the public sector” (1993: 207). Although several countries planned to increase salaries once the necessary staff reductions were made, this has rarely been the case. According to one author, where retrenchment was realized, it should not have been general, since the African civil service was overstaffed at lower levels but understaffed at higher levels (Olowu, 1999: 10). Many civil services, however, remain overstaffed. Retrenchment has been diffi cult politically and not always successful, becoming a major challenge for public performance. As one ATP participant put it, “too many cooks spoil the broth”.

For all of these reasons, a breakdown of capacity has taken place. Mamman and Rees (2007) link this breakdown to the attention devoted to the institutional level at the expense of human and organizational capacities. Many authors today criticize the excessive focus on macroeconomic stability that was in tune with the structural adjustment programmes in the 1980s. Grindle and Hilderbrand claim that “experience with these macro-institutional initiatives has not ‘solved’ the problem of poor performance” (1997: 481). Therkildsen argues in a similar vein that “a variety of objectives – depending on the country concerned – have been pursued in the pay reforms, but concern about fi scal stability has always been at the forefront” (2001: 26). Olowu


48


(1999: 2) also claims that the failed strategies on the African continent have been too focused on technical issues of reducing the size and cost of the civil service, with less attention being given to developing capacity. Consequently, “the inability to attract and retain high quality professionals has been, and still is, the major problem in African civil services”.

Many governments have now set the objective of increasing the pay of their public servants (McCourt 2006b: 175). The success of doing so, however, has been uneven. The lack of fi nancial resources keeps fi nancial incentives, in terms of salaries, from ‘motivating’ staff. When salaries are too low to make ends meet, people take on second or third jobs and divide their time between them. Consequently, from a practical point of view, performance is low. The report Tactics, sequencing and politics of public service pay reform in developing and middle income countries: lessons from sub-Saharan Africa realized by PriceWaterhouseCoopers and the University of Dar es Salaam (Kiragu and Mukandala, 2003) shows that adequate levels of pay are crucial to sustaining the motivation, performance and integrity of public servants. However, the overall funding may simply be too low to pay civil servants more (Hongoro and Normand, 2006: 1318). In some countries, salaries have increased indirectly with the introduction of allowances to compensate for low wages. Such allowances are often discretionary and complex, making the salary system opaque and unclear. According to the World Bank (Mukherjee and Manning, 2000), allowances represent up to 70 per cent or more of the basic salary in Jordan, up to 92 per cent of pay in Indonesia, and even more so in Moldova. The lack of fi nancial and human resources remains a core obstacle for capacity development and for the successful use of incentives. The capacity erosion caused by a public sector’s low salaries and few skilled professionals has been aggravated further by excessive centralisation, patronage and even corruption (Saasa, 2007). In addition, public organizations are characterized by a rigid organizational culture, with no competition from the outside and seniority requirements for promotion. In other words, “the rules of the game are weak and the playing fi eld is far from level” (McLeod, 2005: 9). This is confi rmed by the ATP participants; promotion is often based on a mixture of skills, performance, education, personal relations and political affi liation. The turnover in the MOEs is


49


high. In some countries, however, the turnover is also linked to changes in political leadership and the political affi liation of key civil servants.

The correlation between the level of wages in the public sector and corruption is considered a well-established one (McCourt, 2006b: 162). The UNDP report Ownership, leadership and transformation: can we do better for capacity development? (Lopes and Theisohn, 2004: 115) devotes much attention to the disincentive of petty corruption, which is “found where public servants who may be grossly underpaid depend on small kickbacks from the public to feed their families”. The interviewees agree that squandering government money is an important problem and that attitudes need to change, but that petty corruption is often a simple survival strategy. Often-evoked factors encouraging corruption are linked to salary level, the poor matching of skills to the tasks to be carried out, as well as poor matching of performance and compensation levels (McLeod, 2005: 8). In turn, what Lopes and Theisohn (2004: 116) refer to as “the lack of integrity in emerging political and administrative systems” becomes an additional obstacle for foreign and domestic investment. In the health sector the research on so-called ‘coping strategies’ gives useful insight into staff behaviour when health workers are severely underpaid. Van Lerberghe et al. (2002) illustrate how these coping strategies may have predatory effects and undermine the performance of the health sector. The widespread use of under-the-counter fees is a case in point. Van Lerberghe et al’s argument is that health professionals’ way of dealing with unsatisfactory living and working conditions contributes actively to capacity erosion. More specifi cally, coping strategies create competition for time since many health workers share their time between the public and private sector, which may result in a confl ict of interest. Coping strategies also contribute to both inter-country and urban migration – that is, a brain drain.

In light of the variety and complexity of the obstacles to capacity development, the diffi culty of matching these to concrete incentives is evident. The process of capacity erosion described above is linked clearly to the lack of suffi cient incentives, especially in comparison to the disincentives for enhanced performance. Due to the sustained lack of fi nancial resources, the consequences of pay problems listed by McCourt (2006b: 175) remain characteristic for the situation in the


50


public sectors of many developing and even emerging countries. These include inadequate pay on all levels, opaque remuneration systems, unclear links between pay and responsibilities, unclear links between pay and performance, and insuffi cient pay to retain employees with scarce skills. In other words, the incentives necessary in order to create a professional, neutral and effective civil service have not been in place or have been too weak to be able to break the cycle of capacity erosion.

Lack of knowledge leads to perverse incentives

Poor knowledge about how incentives actually work in practice has also contributed to weaknesses in the design of incentive systems. Whereas the situation described above is linked to the absence of incentives or the presence of disincentives, a number of authors also emphasize the existence of perverse incentives for civil servants. In this context, perverse incentives refer to implemented incentives, the consequences of which deviate or are even opposite from their objective – that is, they contribute to capacity erosion rather than capacity development. Incentives may, for example, be individually positive but fail to offer a coherent and mutually reinforcing incentive scheme when combined. In other words, the mix of incentives may have unintended effects, making them an obstacle to capacity development. According to the UNDP, perverse incentives “block sustainability, promote the use of external resources rather than more cost-effective domestic ones, discourage local initiatives and, at least indirectly, stimulate brain drain” (Lopes and Theisohn, 2004: 91). The literature emphasizes (a) the lack of knowledge about non-fi nancial incentives, (b) counterproductive HRM tools and (c) the distortive effects of donor presence.

(a) Non-fi nancial incentives

Authors such as Ul Haque (2006: 3) link the existence of perverse incentives to the fact that incentives in general constitute an under-researched area. He suggests that by drawing on organization and management theory, it may be possible to shed some light on the linkages and interplay of different kinds of incentives at different levels of analysis in order to design incentive schemes that work


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effectively to motivate staff and improve performance. Some of these linkages have been presented in the fi rst two parts of this literature review but more knowledge is needed, especially when it comes to non-fi nancial incentives. Even though they are used widely in most countries, their impact is rarely monitored and evaluated. Mathauer and Imhoff argue that this is due to the lack of systematic implementation of non-fi nancial incentives; they are often not applied “specifi cally in relation to motivation and performance increases” (2006: 15). Hongoro and Normand argue in a similar manner that little is known about the functioning of non-fi nancial incentives because they do not conform to economic logic (2006: 1315). Adams and Hicks (2000: 3), for example, use economic theories that demonstrate how key payment mechanisms in the health sector provide different incentives for health care providers: whereas salaries provide an incentive to reduce the number of patients and number of services provided, fee-for-service mechanisms will likely increase the number of cases seen as well as the service intensity. As opposed to fi nancial incentives, the short-term consequences and long-term impact of non-fi nancial incentives are diffi cult to measure.

When it comes to non-fi nancial incentives, it is often the complex reality on the ground that transforms a positive incentive into a negative one. Autonomy, for example, may constitute an incentive. Autonomy in itself may be motivating for civil servants and may also allow for an organizational identity to emerge and for new incentives to be introduced. In addition, where organizational autonomy is a consequence of decentralization, it generally responds to external accountability demands linked to the distribution of political power and the proximity to citizens. In their study on the performance of public organizations, Grindle and Hilderbrand found that autonomy “appeared to provide a medium in which mission identities could be established, managerial styles developed to support organizational goals, and performance incentives applied” (1997: 491). However, unless the proper capacities and management skills are present, autonomy may endanger motivational factors such as career structure, job security and transparent management (Hongoro and Normand, 2006: 1314). Attracting skilled professionals to rural areas is a challenge that is linked specifi cally to decentralization processes. Wescott argues that career


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prospects in rural areas are less attractive than in central ministries and that incentives need to compensate for this (1999: 7).

Incentives aimed at strengthening external accountability – that is, accountability to citizens – are often used in parallel to internal accountability mechanisms such as evaluation, controls and regulation. User evaluations, service delivery surveys and citizens’ charters constitute tools for strengthening ‘voice’ and correspond to a responsive governance approach, according to which citizens are considered empowered participants in public activities. Such ‘voice’ mechanisms may enhance public performance by providing incentives for civil servants to respect the rules and strive for effi cient service delivery. In most cases, however, such mechanisms have not proved to be particularly useful for enhancing accountability. Such incentives may be effi cient individually, but putting too many demands on internal and external accountability may create the constraint of multiple accountability (Economic Commission for Africa, 2003). In general, internal accountability is privileged. This was refl ected in the interview sessions; none of the ATP participants identifi ed recognition by the public or by citizens as a motivational factor, whereas recognition by superiors was considered an important factor. In addition, Therkildsen underscores the uncertainty surrounding the actual impact of tools such as user surveys as it is highly uncertain whether the information obtained through such surveys is actually used and whether they “provide incentives for change and increased effi ciency” (2001: 32). The risk of such surveys is that they create pressure without any kind of professionalization in exchange.

(b) HRM tools

Likewise, HRM tools may backfi re and may become counterproductive when they come in confl ict with other motivational factors or are applied inappropriately. Mathauer and Imhoff (2006), for example, found in their study on health worker motivation in Africa that many employees tended to perceive supervision as an exercise of control rather than as a tool for support and recognition. Recognition and appreciation by superiors were often absent in supervision schemes and feedback rarely focused on individual performance. Supervision, normally conceived of as an instrument “to correct shortcomings and


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support good practice” (2006: 9) became a disincentive for employees. This partially refl ects the fi ndings of the interviews conducted with the participants in the IIEP’s Advanced Training Programme. Most of the interviewees did not engage in regular meetings with their superiors in order to evaluate their performance. Feedback was reported to be mainly informal and not used systematically as an HRM tool. Another HRM tool that may backfi re is the emphasis on individual performance when it confl icts with the value of team cooperation. Authors like Hongoro and Normand (2006: 1318) and Mathauer and Imhoff (2006: 13) underscore the potential for tension between individual incentives and success, and teamwork. If the balance between individual incentives and team-based performance is ignored, it may provide a disincentive for individual performance. One of the ATP participants confi rmed that envy among colleagues was a common problem and that supervisors’ lack of support and negative feedback often led to a blame game rather than constructive teamwork within the unit.

Performance-related pay (PRP) is another tool used to stimulate competition and performance. The idea behind it is that PRP will have a motivating effect on individuals, allow the public sector to compete with the private sector for human resources and contain salary costs by reducing the automatic progression of pay levels. PRP can be given as a merit increment or bonus; performance systems may also be used in promotion processes through the use of performance assessments. Common for these systems is that they link individual performance to organizational goals through the measurement of competences and performance. It has been of limited use in developing countries, where salary levels are differentiated but stable and promotion often linked to seniority requirements. Tanzania is one example of a country that has begun to experiment with competence-based promotion. When it is applied properly in the right managerial context, it can indeed be a useful tool for motivating staff. However, the OECD emphasizes the importance of having transparency, trust and clear promotion mechanisms already in place before such systems are introduced (OECD Observer, 2005). If not, diffi culties linked to measuring and assessing performance may undermine their utility and make promotion and salary subject to biased assessments. If PRP is perceived by employees as being biased and not based on ‘just’ criteria linked to performance


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and merit, they may become a disincentive. As already mentioned, other incentives such as job content and career development remain more important incentives for most public employees. According to the UNDP, “the benefi ts of performance pay remain to be demonstrated, and management requirements and costs of installing such systems can be considerable” (UNDP, n.d.: 12).

Performance assessments were considered diffi cult to use, according to several of the ATP participants, since performance cannot easily be measured, especially in the education sector. Finding measurable and fair criteria for promotion or salary raises is a diffi cult task, not only for developing countries. McCourt pertinently observes that “it is notoriously diffi cult to quantify the performance of public servants in the way that such a system requires; even the World Bank as an employer seems to fi nd it hard” (McCourt, 2006b: 176). Therkildsen similarly argues that “there is no commonly accepted framework for establishing what ‘good’ performance means” (2001: 41). In practice, PRP has been less effi cient than expected. However, the OECD Observer argues that the introduction of PRP may have derived effects leading to organizational and managerial change. By emphasizing notions of performance and effi ciency, PRP may function more effi ciently as an organizational incentive than as an individual incentive, introducing a goal-setting approach that might enhance the effi ciency of the organization as a whole.

(c) Donor presence

Public sector organizations in developing countries are not the only employers in need of skilled professionals. A number of bilateral and multilateral donor agencies and NGOs are generally present in these countries and they compete alongside the public sector for human resources. The lack of suffi cient incentives for civil servants is, as we have seen, a major obstacle for capacity development. Moreover, incentives are weakened when compared to those offered by NGOs and donor agencies (Lopes and Theisohn, 2004: 100). Incentives in the form of ‘top-ups’ or direct donor recruitment of skilled staff in the partner countries are a widespread phenomenon. Donor-funded allowances are usually referred to as ‘top-ups’ and are used widely in developing countries. They are “offi cial cash payments or in-kind


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benefi ts that a civil servant receives over and above what colleagues in the same grade and pay scale receive. Often, the original purpose of salary top-ups is to persuade some civil servants to move to positions that (s)he would normally not want to accept” (Mukherjee and Manning, 2002). Even when donors are reticent about handing out top-ups, they may fi nd themselves obliged to do so. Top-ups are often subject to political pressures, making it diffi cult for donors to refuse if they want to cooperate with the government. Also, a common perception is that ‘everybody’ else does it. As a result, top-ups are considered crucial tools in implementing projects with the active support of key civil servants. UN agencies such as the UNDP have given the issue of donor top-ups considerable attention, as this is recognized for being a “widespread phenomenon with distortionary effects” (UNDP, n.d.). Top-ups “draw scarce knowledge and skills away from where they are needed most” in the public sector (Mukherjee and Manning, 2002). The selected civil servants are chosen in a process that is neither transparent nor based on merit and top-ups are subject to a wide variety of donor practices.

In the short run, these incentive schemes may be useful because they help donors implement their capacity development projects. One of the IIEP professionals therefore supports a pragmatic view on top-ups, especially considering that ‘everybody does it’, even if it is frowned upon offi cially. The challenge is to ensure that top-ups contribute to the sustainability of projects after donors exit and in this way, contribute to capacity development in the country as a whole. The risk is that when donor funding decreases and top-ups are phased out, civil servants will seek employment elsewhere. The ad hoc nature of top-ups may thus lead to a public sector brain drain and a distortion of the local labour market. These issues constitute an important challenge to the public sector and to sustainable capacity development in the long run (Lopes and Theisohn, 2004: 8).

Some civil servants are hired directly by donor agencies offering salaries that are much more attractive than public sector pay. The resulting inter-agency competition for skilled staff may have a distortionary effect linked to the paradoxical behaviour of these actors. Therkildsen describes the situation as follows: “Donors may actively seek to infl uence government pay policy. At the same time they distort it by seeking to attract skilled recipient staff to key positions in the


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programmes and projects that they fund” (2001: 26). The DAC (OECD/DAC, 2006) confi rms that “by recruiting local personnel (and offering higher salaries), donors and NGOs often contribute to the skilled professional defi cit in the public sector”. Consequently, these incentives become perverse in the sense that they contribute to a domestic brain drain from the actor responsible for the country’s development – that is, the public sector – to the assisting bilateral and multilateral actors in the development enterprise. One ATP participant agreed that this was a serious problem, but more in terms of quality than quantity as the available positions in donor-funded programmes are rare and far apart, but they attract the best staff. In Afghanistan, job openings are spotted quickly by civil servants and are considered very attractive, primarily in terms of salaries. In Cambodia, an informal agreement between the government and donor agencies keeps the latter from hiring civil servants (ATP participant).

A few authors emphasize another issue linked to the presence of donors, namely the use of foreign consultants. The need to retain domestic human capital is essential and, as Lopes and Theisohn argue, “... existing national capacity can only be retained if the principles that create incentives for expatriates are considered for the nationals” (2004: 106). An alternative solution to using foreign experts could be to use national experts that have left the country, as part of a repatriation strategy. This is the case in Afghanistan, where the government and donor agencies have appealed to the Afghan diasporas for help (IIEP professional). These consultants normally receive important top-ups. Highly experienced consultants cannot be expected to accept the low domestic salaries that probably contributed to them leaving in the fi rst place (Berg, 1993). According to Ul Haque, more research should therefore be done on the costs and benefi ts of the alternative channels of brain drain repatriation and technical assistance for development (Ul Haque, 1999: 475).

From theory to practice: the importance of context

The frameworks that were presented and outlined in the second part of this review emphasized the importance of taking into account the wider context when diagnosing capacity gaps, identifying indirect incentives or disincentives and designing incentives as part of a capacity


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development strategy. In practice, however, this kind of adaptation has rarely been the case. Wescott (1999) argues that the ideal-type Weberian bureaucratic model based on the logic of downsizing has had perverse effects on incentives in Africa, leading to rent-seeking and other unintended outcomes, such as ghost workers: “Reforms such as downsizing and rightsizing not only threaten the careers of civil servants [...] but threaten the well-being of the network of kin, etc. supported by the job holder. This is important in Africa because of the absence of social security safety nets provided by the state” (1999: 20). A number of authors have criticized the way the more recent New Public Management (NPM) tools were introduced in the 1980s and 1990s. They warn against the blind application of models elaborated in developed countries. NPM blueprints do not take into consideration the historical, cultural, economic and political specifi cities of the country in question. McCourt (2006c) describes how countries like Mauritius, Malaysia and Namibia have introduced performance-related pay schemes and have ended up duplicating many of the errors made by the countries serving as their models (in particular, the UK and New Zealand). Bana and McCourt (2006) are among the authors who underscore the importance of analysing an institutional framework within its politico-historical context, including informal power confi gurations, which may prove diffi cult to change, despite political commitment to reform. It is only through adapting incentive systems that an independent bureaucracy capable of fostering civil service capacity and confi dence can emerge. What contextual aspects should be taken into account ultimately depends on the specifi c country in question.

When it comes to undertaking an analytical diagnosis, DAC describes the increasing use by donor agencies of ‘power analysis’ or ‘institutional analysis’ in order to be able to foster an enabling environment for capacity development (OECD/DAC, 2006: 21). Such diagnostic tools may be useful in understanding the incentive structures that exist in and regulate a given sector, especially if these are of an informal nature. The DAC argues that it is only by fully understanding the functioning of such structures that institutional and organizational change can take place. Sida (2006) describes how power analysis can stimulate thinking about what can be done in order to reach policy goals in terms of formal and informal power relations, structures and


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the actors or incentives involved. Key issues deal with articulation and voice – that is, the capacity of civil society to impose demands upon the state – and responsiveness – that is, public mechanisms capable of acting upon these demands. This involves an analysis of the institutions and structures that shape capacity and incentives for actors within the public sector. The following examples taken from the literature emphasize three different contextual aspects (history, social and ethnic issues, and political instrumentalization) which may be relevant when designing incentives.

The decompression of salary levels followed by the introduction of performance-related pay, for example, have proved particularly diffi cult to implement in countries where previous communist regimes have fostered strong egalitarian norms and mentalities (Verheijen, 2000). This is true for many African and Eastern European countries. The wider institutional framework in these countries remains affected by a legacy of bureaucratic politicization and egalitarianism. Incentives aimed at accountability, such as ombudsman institutions and citizens’ charters, have proved equally diffi cult to introduce in many central and Eastern European countries because of the legalistic culture. The value of legislation has generally been overestimated, while changing administrative culture has been underestimated, since “laws do not change mentalities” (Verheijen, 2000: 42). Mengistu and Vogel (2006: 214) offer another perspective on the importance of context by discussing the value of bureaucratic neutrality, ethnicity and civil service reform in Ethiopia. The key question is whether civil servants should be selected on the basis of competence or ethnic representation. Diversity may function as an incentive in the sense that equal opportunities for employment may transform the public sector into a more attractive employer (Van Lerberghe et al., 2002). Wescott also touches upon this question when discussing the issue of gender balance in the civil service (1999: 5). The UNCDF (2005) illustrates how incentives have been applied to achieve gender mainstreaming at the local level in Uganda. McCourt gives a similar example from South Africa and links the issue explicitly to effi ciency: South Africa has made it a priority to transform apartheid bureaucracy through affi rmative action, “into a public workforce which represents the ethnic and gender composition of the country’s population”


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(McCourt, 2006b: 162). However, McCourt argues that this objective has overshadowed conventional effi ciency objectives (2006b: 163). According to the UNCDF, there is, as yet, “insuffi cient evidence to fully demonstrate the effectiveness of these kinds of incentives” (2006: 78). Grindle and Hilderbrand (2006: 61) emphasize the importance of the political context for successful capacity development. Capacity development activities regularly become instruments of the political leaders in order to gain votes and popularity. Grindle and Hilderbrand illustrate this process at the decentralized level by looking at the conditions under which newly elected administrations in a number of Mexican municipalities initiated capacity-building programmes. According to Grindle and Hilderbrand, “the study of the performance of municipalities adjusting to new responsibilities provides insight into the political dynamics of public sector capacity building efforts” (2006: 57). Elected for three years and not allowed to be re-elected, local governments generally emphasized policies linked to modernization and change at the beginning of each elected term. Reorganization took place; the profi les of public appointments were changed; and training, technical up-grading and performance standards were introduced. The incumbent local government deployed such strategies early on in order to differentiate itself from the previous one: “Almost all capacity building initiatives were introduced within the fi rst months of taking offi ce, suggesting the importance of electoral calendars to the activities of municipal offi cials” (2006: 67). This example corresponds to the observation made by one of the interviewees, an IIEP professional, that incentives are distributed not only as a motivational strategy but as a way to strengthen and solidify an individual’s proper position in a given organization or institution. Capacity development initiatives are thus facilitated by the incumbent administration in the short run, but changes in political leadership may endanger their institutionalization in the long run. Consequently, sustainability becomes a problem, since “the very fl exibility that allowed for signifi cant change [...] raised barriers to its institutionalization over time” (2006: 67).

The diffi culties of reform: obstacles to implementation

The issues related to the content side of incentives provide some insight into how incentives function and why they often fail to do so.


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However, it is not the full story. The limited impact of incentives for civil servants is also linked to the issue of reform. Incentives generally play a central role in three major types of reform (Caiden and Sundaram, 2004):

1) civil service reform: the management of human resources;2) accountability reform: enhance transparency, oversight and

control; 3) managerial reform: contracting out, decentralization and

results-based management.

According to the World Bank (2008a: 54), the tools and instruments for comparative civil service analyses are underdeveloped, because there is no consensus within the development community on the ‘right’ reform model for developing countries. The competing objectives of affordability, performance and accountability – and the sequencing and fi t with political realities – are common issues that are encountered by most countries undertaking reform. Accountability and managerial reform have received much attention recently and will be considered in more detail in the next part of this literature analysis. Civil service reform, often introduced as part of wider public sector reform, remains the basic type of reform used in order to enhance the performance of the public service. A number of authors link the failure of this type of reform to the approach taken and to the various obstacles in the implementation process. Again, the importance of context is evident; it is only by looking at the wider context that one can identify constraining factors to reform. According to McCourt (2006b: 164), “political, economic and social factors have infl uenced the conduct and outcomes of reform”.

The challenges of initiating reform are often similar. Caiden and Sundaram (2004) emphasize the erosion of public capacity, widespread corruption and the need to attract and retain talent. These are but a few of the issues that need to be addressed. Like the challenges of initiating reform, the obstacles encountered during the implementation process are often similar, making reform risky and rarely successful. According to the World Bank, civil service reform supported by the Bank has been largely unsuccessful because of major political diffi culties encountered underway, a technocratic approach to reform, and limited ownership and


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relevance of reform (World Bank, 2008a). Polidano (2001: 1) similarly emphasizes three main tactical elements: the scope of reform, the role of aid donors and the leadership of reform. These aspects relate to reform efforts in general, whether they are civil service reform or wider public sector reform. They go beyond the specifi c issue of incentives, but are worth mentioning because reforms related to incentives are rarely addressed separately. The limited impact of reforms is analysed by most authors in terms of (1) the need for commitment and support, and (2) the existing capacity and its impact on the scope and sequencing of reform.

Commitment and support

Civil service reform has generally been considered more diffi cult to implement and institutionalize than other types of public sector reform. As described, the lack of fi nancial resources has made it diffi cult to establish adequate fi nancial incentives (Rugumyamheto, 2004: 439). The World Bank also emphasizes the lack of political commitment to reform as a major obstacle to creating an effi cient civil service. The ATP participants widely agreed with this view. ‘Rightsizing’ the public sector through the reduction of the size of the civil service has proved politically to be very diffi cult to achieve (World Bank, 2008a: xi). The lack of proper implementation therefore characterizes a number of reform efforts. Reform strategies need consistent support from all actors involved and a systematic plan of action in order to be implemented successfully in a sustainable manner. A number of analyses imply that successful reform depends, to a large extent, on politicians’ incentives to create a momentum for reform and maintain this momentum throughout the reform process. The momentum for reform may slow down after a while due to competing policy objectives, such as reducing public expenditure, or other kinds of institutional pressures. Projects may end up stalling altogether, or “put into effect only in a tokenistic, half-hearted fashion” (Polidano, 2001: 2). This has been the case in Ghana, Argentina and the Republic of Yemen (World Bank, 2008a). The World Bank (2008a: 52) has classifi ed a number of civil service reform components in terms of political risk, fi nancial implications and demands on capacity. Incentives linked to compensation and HRM reform are considered politically risky compared to traditional


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measures to contain and reduce the number of staff. The political risk is especially pronounced in egalitarian cultures and patronage-based systems. Compensation and HRM reform also contain fi nancial costs and are perceived of as capacity-demanding, thus reducing their chance of being implemented successfully.

A number of authors criticize this view. They concede that the limited impact of reform is linked partially to insuffi cient domestic political commitment but it is not the whole story. The presence and active involvement of donor agencies in these countries are equally responsible. Polidano (2001: 4) identifi es excessive donor infl uence and lack of leadership as obstacles for ownership, which in turn becomes an obstacle for reform. According to Olowu (1999: 16), the question of ownership is indeed crucial in this context, in view of the fact that most civil service reform has been introduced without consulting key stakeholders. Ul Haque similarly argues that “there is limited domestic ownership of a product whose origins lie overseas” (1999: 484). The previously mentioned survey on bureaucratic structure and performance in Africa (Court, Kristen and Weder, 1999: 7-8) found that “bureaucrats across the continent felt that economic policy is formulated outside the country, particularly by the Bretton Woods Institutions”. These reforms have also been characterized by their extensive focus on short-term processes because of donor demands for quick results. As a result, long-term processes, such as changes in organizational behaviour, have not been privileged. Olowu confi rms that “the reality of most reform initiatives is the dominance of external timetables and immediate results” (1999: 16). ‘Disbursement pressures’, tied aid and fragmented development efforts are other obstacles linked to donor involvement (Lopes and Theisohn, 2004: 93). Wescott (1999: 3) suggests that the role of donors should be limited to one of facilitation and consultation. The general involvement of donors and the vested interests of actors involved in development cooperation may lead to perverse incentives: the UNDP has demonstrated how politics often gets in the way of pursuing development objectives. As a result, aid funds are often given to countries with mixed development results and not to countries with a successful growth and equity record. This is referred to by market analysts as ‘moral hazard’ and may be a negative incentive


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for developing countries pursuing reform if good development is not rewarded (Lopes and Theisohn, 2004: 93).

In addition to political commitment and donor involvement, the support of civil servants for reform is equally crucial. An effective civil service is a necessary condition for an effective state and economic growth. Olowu (1999: 8) pertinently illustrates the important and multiple roles the civil service plays in society and the economy, not only as an instrument for policy-making, but also as an institution of employment and governance. This should be taken into consideration when introducing reforms that depend upon the effi ciency and support of the civil service. Schneider and Heredia (2003) qualify the commitment of the bureaucracy as a deciding factor for reform, which often proves diffi cult to foster. The World Bank (2008a) also observes that support from central parts of the civil service, such as senior offi cers, is crucial in this respect. The distinction between public sector reform that addresses the issue of incentives for civil servants and that which does not is therefore important. When incentives do not accompany wider reforms, willingness to implement them effi ciently is often absent. This is especially true when measures related to retrenchment are not accompanied by salary augmentation for the remaining employees. An ATP participant confi rmed that the civil service was often reticent about reform, with the exception of reform being perceived as benefi tting them. In general, reform simply means more work and demands a greater effort on behalf of the civil servants. If this greater effort is not compensated by incentives, reform processes may easily stall. The fi t between incentive-specifi c reform and the overall public reform process is therefore an additional challenge that needs to be addressed.

The reticence towards reform may also be linked to existing practices of patronage – that is, moneyless corruption and bureaucratic politicization. Huber and McCarty (2004) elaborate a model according to which low bureaucratic capacity provides few incentives for civil servants to do their work effi ciently and few incentives for politicians to undertake reform. The model illustrates that there are strong incentives for politicians to politicize the bureaucracy when bureaucratic capacity is low and that when bureaucrats become politicized, the incentive to reform bureaucracy is low. Schneider and Heredia (2003) support this argumentation. They claim that when the relationship between political


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reformers and civil servants is too close, the incentive for reform will generally be low. This has been the case in Mexico and Thailand. According to Caiden and Sundaram (2004), attention therefore needs to be devoted to designing direct incentives aimed at changing civil service attitudes towards reform and replacing patronage with merit. If not, the lack of capacity may create a vicious circle leading to patronage and bureaucratic politicization, which in turn impede reform and capacity development. This implies that a minimum level of capacity facilitates reform. In other words, capacity is itself a condition for capacity development.

Existing capacity and its impact on the scope and sequencing of reform

The importance of a minimum level of capacity for successful reform is also emphasized when it comes to issues related to the scope of reform. Berg (1993) compares public reform efforts to technical cooperation projects: whereas they both aim to improve organizational capacity, their success depends to a large extent on the existence of a certain level of organizational cohesion and stability. This explains why public sector reform succeeds where it is least needed, such as in middle-income countries. In low-income countries, where reform is urgent, there have been fewer improvements. Tajikistan is a case in point. The country’s wage system is opaque, highly compressed and with extremely low wage levels. Various allowances and supplements add to the complexity. While the World Bank normally would recommend a comprehensive reform to deal with this complexity, it recognizes that the country’s low capacity makes it necessary to take a step-by-step approach to reform. In other cases, the lack of capacity has been translated by a superfi cial reform process, not leading to any in-depth change. McCourt (2006c) presents fi ndings from seven African countries where this has been the case: strategic HRM in the form of mission statements were introduced, for example, but did not at all change the day-to-day management. Verheijen (2000) also observes that in Eastern and central European countries, the gap between offi cial statements for reform and actual progress has been considerable.

Polidano argues that in some cases, “incentives and performance measures are so complex that it may be more advisable to introduce


65


changes as small-scale experiments” (2001: 1). On the other hand, comprehensive reform may be needed, since low administrative capacity is not only linked to structure, but to rooted social norms and institutionalized behavioural patterns. Simply changing incentive schemes will not deal with such institutionalized behaviour. An ATP participant similarly argued that simply enhancing fi nancial incentives would not automatically reduce the incidence of corruption. More in-depth measures were deemed necessary, such as changing the attitudes of civil servants. Comprehensive institutional reform may therefore be necessary in countries with a high degree of patrimonialism and corruption. This paradox illustrates the complexity of the issue at hand. A low level of capacity may easily become an obstacle when considering the complexity of incentives and the need for comprehensive reform. As one of the IIEP interviewees observed, “once the system is down, it’s diffi cult”. The interviewee further warned against simply increasing salaries, arguing that something must be given in exchange for enhancing the fi nancial incentives. This ‘something’ should be linked to the changing of attitudes. The level of capacity, understood as structurally, socially and institutionally linked, should therefore be considered when deciding on the scope of reform in order to avoid unrealistic expectations, unpredictable government commitment and reform that fails to take care of the basics fi rst (World Bank, 2008a: 40).

Taking care of the basics is linked to the sequencing of reform. Agencies tend to make a difference between fi rst and second generation reforms. First generation reform is aimed at decreasing the size of the public sector and increasing the salaries of the remaining civil servants. This is referred to in the literature as ‘rightsizing’ the civil service. Whereas reducing the size of the public sector was achieved partially through the removal of ghost workers, increasing salaries has been fi nancially impossible for many countries. Uganda is a case in point. The country presented a comprehensive strategic framework for reform, which impressed the donor community. In reality, most of the money was used for paying retrenchment benefi ts (Polidano, 2001: 3). Olowu confi rms that fi rst generation reform has proved to be costly and counterproductive (1999: 8). Second generation reform is inspired by the New Public Management ideology and toolbox.


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Often-used tools include the reorientation of the state administration towards more competition, a reduction in administrative fragmentation and the rationalization of manpower (Caiden and Sundaram, 2004). Complementary tools are linked to the introduction of management and accountability systems and improving the conditions of employment (Grindle and Hilderbrand, 1997: 481). Kayizzi-Mugerwa (2003) argues that second generation reform has been diffi cult to implement due to the limited success of fi rst generation reform. Kiragu and Mukandala (2003) argue that in many cases, contradictory approaches to pay reform are applied, making the task all the more diffi cult. Consequently, neither pay and employment reform nor general administrative reform have resolved the challenges of capacity development. In many cases, reform has “by and large been limited to job reduction – improving the quality of administration remains to be addressed” (McCourt, 2006b: 168).


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4. REFORMS AND SUCCESSES

Renewed interest in incentives for civil servants

Despite these obstacles and the limited motivation of civil servants to be part of a reform process, a few relatively successful reforms and innovative approaches to the issue of incentives may be identifi ed. They constitute a limited number of best practices and are often made reference to in the recent literature. These best practices are relatively rare. Nevertheless, they have contributed to the renewed interest in incentives for civil servants within the development community. Authors such as Ul Haque (2006) link this renewed attention to the ‘good governance’ perspective and the increasing emphasis by international agencies on the functioning of public institutions. The new development discourse, exemplifi ed by the focus on capacity development, has seemingly placed the question of incentives and civil service reform at the forefront of the development agenda. This approach recognizes that reform must be people centred if it is to succeed and that incentives are effi cient tools for linking people and change. Consequently, the place of civil service reform is changing, from being a non-issue to a simple budgetary concern, to becoming a key issue in public sector reform (Ul Haque, 2006). More than half of the World Bank’s projects on public sector reform (lending projects with public sector reform components) from 1990 to 2006 (261 out of 467, to be precise) include a civil service and administrative reform theme (World Bank, 2008a: 21, 29). According to the World Bank, the factors for successful donor-supported reform include general analytical diagnosis and advice, pragmatic opportunism in selecting reforms to support, realistic external expectations, appropriate packages of lending instruments, tangible indicators of success and effective donor coordination (World Bank, 2008a: 54). In short, and as mentioned, both content and strategy matter. However, donors cannot manage a reform process without the necessary support from stakeholders. Kayizzi-Mugerwa (2003) recognizes that African bureaucracies are simultaneously part of the problem and of the solution. In a similar vein, Caiden and Sundaram (2004: 383) place incentives for the civil service at the centre of public service reform. This trend is also


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refl ected on the ground. The ATP participants confi rmed that the issue of civil service reform is discussed widely in the countries concerned, but that it needs to be debated more seriously beyond its continuous use in political rhetoric – the demand for this type of reform is often instrumentalized by the political opposition, without a real reform proposal being presented.

Capacity development through the training of human resources is but one of the many recent reform elements that puts the issue of incentives at the centre of civil service reform. Other elements include the restoration of meritocracy (focusing on the highly-skilled levels), improving accountability and competitiveness, and the mobilization of additional resources (Olowu, 1999). The principal issues emphasized by most authors, however, are linked to pay reform, merit-based recruitment and promotion, and increased accountability. In practice, reforms have evolved progressively by emphasizing these issues in the order listed. The World Bank confi rms that since 2000, “merit-based reforms are becoming more important than down-sizing and pay reforms” (2008a: 29). This refl ects the already mentioned renewed focus on incentives in general. Whereas these issues are subject to state action – that is, reforms introduced by the government – accountability, another non-fi nancial external incentive, may also be imposed from the outside. UN Department of Economic and Social Affairs (DESA) (2005) links accountability to a specifi c model of governance, namely responsive governance. This model values accountability to citizens and stakeholders, empowerment, transparency and participation. It represents an alternative to the preceding models of public sector reform, namely traditional public administration and New Public Management. From an emphasis on pay reform to merit-based reform, current reforms emphasize the accountability dimension of public sector organizations.

Analyses of these best practices include the reasons for their relative success as well as the challenges encountered. The following sections take these issues into account and give additional empirical insight into the obstacles that were presented above in a more theoretical and general manner.


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Reforms and successes

Pay-based and merit-based reforms

When it comes to pay-based reform, a useful point of departure is the proposed solutions to the various pay problems encountered by many countries and outlined by McCourt (2006b: 175). The problems and their proposed solutions are as follows:

Box 6. Reasons for and types of pay reform Pay reformPay problems Proposed solutionsInadequate pay on all levels Across-the-board pay risesOpaque remuneration systems Consolidation of remunerationUnclear links between pay and responsibilities

Job evaluation: gives a more justifi able basis for pay differentials

Unclear links between pay and performance

Performance-related pay

Insuffi cient pay to retain employees with scarce skills

Pay decompression and pay differentials

Source: McCourt (2006b: 175).

As mentioned, across-the-board pay rises have been relatively modest, if not non-existent. Several of the ATP participants explained that salaries do increase on a yearly basis, but that this increase is very small and makes no difference, especially when compared to the infl ation increases these countries experience. According to the ATP participants from the poorest countries, salary levels remain highly compressed. As a result, salary increases through promotion do not constitute a motivational factor. Promotion was perceived by the ATP participants as dependent upon a mixture of skills, performance, seniority, personal relations and political affi liation. Progress is slow, but real. In Senegal and Cambodia, detailed job descriptions and evaluations are increasingly being used and provide incentives for performance (ATP participants). In Albania, the development of measurable indicators of results has allowed for government tracking of the percentage of recruitment done by merit. Such tracking provides a “transparent method of demonstrating progress in implementation” (World Bank, 2008a: 56). In many countries, however, the link between pay and performance is non-existent. Salary levels depend on the diplomas acquired and on seniority. Remuneration systems remain opaque, with a mix of fi nancial and non-fi nancial incentives. Various


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allowances are used in order to compensate for low salaries. In several countries, pay reforms have attempted to monetize allowances and benefi ts such as housing and transport, allowing salary differentials to increase. The objective of such a pay policy is to be able to pay civil servants a living wage. Uganda is a case in point. McCourt observes that “the pay compression ratio between the highest and the lowest-paid staff of 1:6.8 in Uganda changed to 1:100 after non-monetary allowances and benefi ts were included” (2006b: 175). Nominal pay increased about 50 per cent from 1990 to 1994, although from very low levels, as a result of reducing the number of public employees (Wescott, 1999: 9, Therkildsen, 2001). In addition, performance and results-oriented processes have been introduced (Rahman, 2001). The World Bank (2005), in the report Tajikistan – civil and public sector service wage note, presents a similar overview of the issues linked to pay reform in this country, which are also valid for many other countries. The World Bank puts forward a number of steps that should be taken in order to improve the situation. Like in Uganda, an important step is the integration of bonuses and allowances into a new base pay ration. Other measures include changing the calculation of the qualifi cation rank payment, introducing a decompression policy and establishing an incentives fund that may be used to pay supplements to staff in positions that are in high demand. Some of these measures have already been introduced through pilot projects.

In Cambodia, a pilot project named the New Deal Experiment provides an example from the health sector (Hongoro and Normand, 2006: 1319). The concerted initiative was launched in 2000 by the Ministry of Health, Médecins Sans Frontières and the UN Children’s Fund in response to the high levels of absenteeism, low levels of working hours and low quality of public health service in the Sotnikum district. Salaries were increased in order to make health workers respect job descriptions and working hours, and avoid unethical behaviour, such as the payment of informal fees. Bonuses were distributed when these internal regulations were fully respected. By “tackling the problem of low offi cial income”, the quality of service provision improved considerably and family expenditures on health fell considerably (Hongoro and Normand, 2006: 1319). At the same time, however, extensive use of bonuses created a serious hospital


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debt crisis. Hongoro and Normand (2006: 1313-1314) gives another example of incentive packages within the health sector – the so-called vertical programmes for priority areas (such as malaria, family planning and STDs). Incentive schemes incorporated into these programmes have proved particularly successful. Goals were specifi ed, understood and shared by staff, and linked directly to incentives. In addition, incentives included better salaries, fi eld and transportation allowances, streamlined management, better facilities and material resources, results-oriented management and specialized training. The reasons for success are linked to the combination of fi nancial and non-fi nancial incentives, and the additional material and fi nancial resources received from donors. In addition, their autonomy makes it easier to avoid the time-consuming bureaucracy, underfunding and lack of capacity in the public health system. According to the World Bank, pilot projects constitute effective instruments for reform, especially in countries where comprehensive reform would most likely fail (2008a: 55). Mengesha and Common (2007) have assessed the impact of one such pilot project in Ethiopia, where the public sector has gone through a number of reforms. General human resources management became a key area for reform in 1996. The most recent reform phase began in 2001 with the Public Sector Capacity Building Support Program, which focused on the improvement of service delivery, citizen empowerment and the promotion of good governance and accountability. One of the policy’s main objectives is to build a civil service that is ethically sound and free of corruption, nepotism and favouritism. In order to achieve this goal, it has been recognized that a change in bureaucratic values is needed. The authors evaluate the introduction of Business Process Reengineering (BPR) in two ministries – the Ministry of Education and the Ministry of Trade and Industry. BPR is a management approach designed to improve individual performance and targets the effi ciency of various processes within an organization. The initiative is part of the ‘Performance and Service Delivery Improvement Policy’ implemented in selected ministries. To date, the reform has been fairly successful and has resulted in substantially improved service delivery, “in addition to streamlining processes, eliminating duplication of work and enhancing user satisfaction” (2007: 371). The implementation of incentive schemes and monitoring systems is not considered part of the


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reform, but rather conceived of as an auxiliary to the reform process. Incentives are conceived of as a ‘partnering’ factor that should be introduced in order to protect the wider reform from backsliding and in order to maintain the momentum for reform and ‘cascade’ elements of it to other ministries (2007: 367).

The successful elements of the initiatives presented above correspond to the fi ndings presented in the theoretical part of this paper. That is, fi nancial incentives, such as salaries, are important and need to be dealt with. In addition, non-fi nancial incentives need to accompany the fi nancial ones and a deeper change in values and attitudes is needed. For this to occur, reforms and incentives have to target issues of performance and accountability at the individual, organizational and institutional levels. The political and socio-economic context must be taken into account, such as the desire for change, and the groundwork for reform should be well prepared. In addition, progress needs to be monitored and its benefi ts evaluated continually: “Unlike tax reform, where leaders see obvious benefi ts, the political leadership cannot easily identify tangible benefi ts of CSA (civil service and administrative) reform” (World Bank, 2008a: 56). Appropriate monitoring systems therefore need to be established. Ultimately, pilot institutions and parallel initiatives such as the targeted interventions set up to tackle particular diseases need to be mainstreamed or reintegrated into the public sector in order to be recognized as national successes.

Facilitating general reform through incentives

Tanzania is another country in which civil service reform accompanies wider public sector reform and as such, uses pay reform as an incentive for accelerating the wider reform process. The Tanzanian Selected Accelerated Salary Enhancement (SASE) scheme is identifi ed by a number of authors as the prime example of a relatively successful pay reform initiative. The SASE scheme attempts to make salaries a sustainable incentive for public offi cials in the context of wider public sector reform (Lopes and Theisohn, 2004: 292). The objective is to target the public servants closest to and most decisive for the reform process. Key staff whose contributions have been critical to improved performance have been severely underpaid in the past, making reform diffi cult to implement effi ciently (Morgan and Baser, 2007). Reformers


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made the assumption that by enhancing the salaries of key public servants, the reform process would regain momentum. In addition to facilitating reform, the fi nancial incentive scheme is a strategy for phasing out top-ups by gradually improving pay – it is a response to the pronounced will to avoid the distortionary effects of donor top-ups. By agreeing to contribute fi nancially to the SASE scheme, donors have contributed to harmonizing salary levels under the leadership of the Tanzanian Government (Lopes and Theisohn, 2004: 101). The SASE scheme is, in other words, a top-up given by the government, with the aid of donors, to civil servants in charge of reform implementation. Job descriptions and a performance appraisal system have been introduced in order to evaluate the recipients of these top-ups and the overall scheme is evaluated annually. The selection of recipients is transparent and targets the personnel with the greatest impact on service delivery. The additional sum they receive corresponds to the difference between the current pay and the medium-term policy targets, set in 1999, which aim to gradually increase competitive pay levels. As these pay levels increase progressively, the SASE top-up will decrease proportionally. In other countries, agreements are also increasingly being made between donors and recipient governments regarding top-ups, for example by putting a ceiling on salaries and the travel or meeting allowances offered by donors.

The DAC (OECD/DAC, 2006: 27) situates this innovative reform between the “divisive and uncoordinated” top-up schemes of the past and the fully-fl edged public service pay reform. In other words, it is a gradual approach to pay reform, which takes into account the practice of top-ups. Rugumyamheto (2004) characterizes the reform strategy as particularly promising because it contains various innovations designed to fi t the specifi c national context. Morgan and Baser (2007) links the initial success of this reform to the nature of the Tanzanian governance structure, which appears to rely less on personalization and informal structures compared to other African countries. Consequently, the incentive to rely on performance is greater. In addition, the country’s public organizations clearly make the distinction between its political and bureaucratic spheres. Appointments to public organizations are increasingly being made through public notices and competitive selection. The SASE scheme is thus perceived by many authors as a


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balanced, progressive reform which is well adapted to the Tanzanian context and reinforced by embedded bureaucratic values, such as transparency and performance.

However, as with most innovations, it has not been a problem-free process. Despite the initial success of the initiative, problems have surfaced with regard to civil servants, political opposition and external donors. The problems are linked generally to the pace of implementation and the lack of fi nancial resources. Matching incentives to different categories of staff and avoiding confl ict between these categories is a major challenge, which the SASE scheme has not been able to avoid (Adams and Hicks, 2000). The legacy of egalitarianism has contributed to the discontent of non-SASE offi cers because they perceive the incentive scheme as unfair. As the ATP participant from Tanzania explained, the gradual increase in salaries for non-SASE staff, as set in the medium-term policy targets, is not respected. Salaries do increase, but only marginally. The country cannot afford to pay living wages to all civil servants (Morgan and Baser, 2007). At the end of the day, the ATP participant said, the non-SASE civil servants have the same needs as those who receive the SASE top-up, but are far from getting the same resources: “We go to the same market – the differences should be smaller”. The political opposition has criticized the reform in order to mark its opposition to the incumbent government, even though some of the members of the opposition also benefi t from the scheme. Donors are becoming increasingly reluctant to fund the scheme as the money is not being used as planned (OECD/DAC, 2006: 27). In addition, performance assessments of civil servants benefi tting from the scheme have proved diffi cult to realize in practice and the interpretation of selection criteria varies across ministries. Consequently, “issues of the capacity to manage the system arise” (Lopes and Theisohn, 2004: 291). Rugumyamheto argued in 2004 that these obstacles risked making the SASE nothing more than a short-lived pilot project. Four years later, however, the SASE scheme is still in place. According to the Tanzanian President’s Offi ce for public service management (see www.utumishi.go.tz), progress in the implementation of this strategy took place much slower than planned: “In July 2006, at the turn of the 2006/07 fi nancial year, signifi cant increases in pay were realised and pay targets were almost met. Work on the consolidation of non-incidental allowances into salaries, which started in the mid-1990s to achieve a more transparent


http://www.utumishi

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pay structure, was completed.” Despite this progress, “Tanzania’s public service pay remains uncompetitive and compressed thereby hindering the recruitment and retention of qualifi ed and experienced technical and managerial professionals in the public service” (see www.utumishi.go.tz).

The last example of pay- and merit-based reform is given by the UNCDF (2005: 69), which has devoted much attention to the issue of performance-based funding to local governments. This is considered a promising innovation that links fi nancial incentives to merit on the organizational level. In other words, it is an organizational, merit-based fi nancial incentive. Fiscal transfers are used as fi nancial incentives in order to improve performance on the local level. Uganda is again a case in point, although Bangladesh and Mali have introduced similar schemes. The UNCDF has worked closely with the Ministry of Local Government in Uganda in order to design grant modalities with inbuilt performance incentives. In addition, the public is informed of the conditions to be fulfi lled by local governments, the results of the performance assessments and the grants awarded by the ministry. The UNDCF observed that “as a result, the public became much more concerned about local government performance, as it now had a visible and direct link to service provision (the amount of development funds the council was allocated)” (2005: 69). This is an innovative example of how funding schemes may be linked to merit and in turn, become a useful tool for ensuring the internal and external accountability of public organizations in a decentralized context. Rugumyamheto confi rms that better supply and stronger demands go hand in hand: “As incentives for civil servants create a momentum for increased performance, the public’s expectations are raised, and the external demands for accountability and effi ciency are strengthened” (2004: 444). Consequently, pay- and merit-based reform may go beyond structural changes and lead to a re-orientation of attitudes for public servants and the general public in order to improve performance and service delivery.

Accountability

Accountability-linked incentives are non-fi nancial and in general target organizations and not individuals. In this sense, they are distinct from the basic fi nancial, individual incentives. Whereas


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internal accountability is linked to management issues and constitutes a top-down approach, external accountability is closely linked to issues of citizen empowerment and constitutes a bottom-up approach to capacity development. It has been introduced in some form or another in several countries, such as India and Bangladesh, or through citizens’ charters in South Africa and Zimbabwe. In Uganda, local governments recently signed the Ugandan Charter of Accountability and Ethical Code of Conduct. This is seen as a mechanism for ensuring accountability and improved performance, but also for preventing recentralization. Public complaints mechanisms and user charges are also much-used tools. In Malawi, an ombudsman has recently been created. The actual accountability outcomes, however, are uncertain and under-researched. In developed countries, such as the UK, there has been limited public awareness of citizens’ charters (Therkildsen, 2001). Therkildsen (2001) does give an example of an interesting exception, namely the case of Ugandan primary education, “a sector to which that country’s president pays direct attention”. A few authors remain sceptical towards this kind of reform, however. Polidano (2001: 10) argues that internal accountability should be privileged in view of the fact that many service delivery surveys have had little impact. Kayizzi-Mugerwa (2003) suggests that such reforms may have to be internalized to some degree by civil servants themselves in order to lead to improved performance.

However, external accountability may be both a demand- and supply-driven process. The public may impose demands of enhanced performance through the introduction of various accountability measures. If successful, these small, innovative initiatives then become streamlined and ‘recognized’ by the state as an incentive for enhanced performance. As mentioned elsewhere in this literature review, however, successful capacity development through the strengthening of ‘voice’ demands a pre-existing minimum level of capacity. In this context, capacity refers to the organization of civil society, its tools for mobilization and the necessary resources in order to impose accountability demands upon public sector organizations through advocacy or watchdog activities. External accountability measures will be futile if civil society is not infl uential enough to push for reform or hold the civil service accountable. On the other hand, such demands


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also depend on the public sector’s capacity to accommodate them. The UNDP (Lopes and Theisohn, 2004) presents two examples of demand-driven processes of external accountability, both initiated by Indian civil society. Whereas the fi rst takes a more traditional approach through the use of evaluations and the grading of public services, the second example involves, in a creative manner, citizens in the oversight of public expenditure.

The UNDP (n.d) cites public expenditure tracking systems as a useful tool for strengthening external accountability and the UNCDF (2005) emphasizes the importance of establishing incentives for making information available to the public. The example of public hearings in India, the jan sunwais, answers to both of these elements. It was started by a small NGO in Rajasthan, whose goal was to improve citizens’ oversight of public allocations and expenditure on the local level, for example when it comes to development expenditure. Through a participative process, where citizens, government and anyone concerned with the issue in question are invited to participate, expenditure records are read out, discussed and verifi ed by the public. Discrepancies are compiled and commented on, and the inhabitants of the village in question decide what further action should be taken. In addition to transparency, objectives include the accountability of offi cials, the redress of grievances and the legitimization of the process of public audits (Lopes and Theisohn, 2004: 118). The hearings have become widespread and have had a real impact: public apologies have been made and missing funds have been returned. According to the UNDP, “the fi ndings that have been gathered bolster the belief that corruption alone drains away a large portion of public expenditure” (Lopes and Theisohn, 2004: 235). The obstacles encountered are linked to diffi culties in obtaining information and the capacities needed for research. The release of public documentation has proved to be diffi cult and civil servants have been sceptical towards showing up at the hearings. Nevertheless, what started in a remote village as an initiative “to challenge local government functionaries on disbursements of drought relief funds [...] ended up carrying out one of the most energetic civil society campaigns in recent Indian history” (Lopes and Theisohn, 2004: 234). The campaign concerned the right to information, the slogan being ‘the right to know; the right to live’.


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The second example, also from India, is the use of citizen report cards in order to improve service delivery and performance (Lopes and Theisohn, 2004: 233). In Bangalore, government agencies are graded by lower income groups through user surveys that assess the performance of public services such as electricity and water supply. The results are shared with the public organization in question and then published in the media. The report cards have proved to be effi cient tools of pressure for change, leading to improved performance in the worst-rated services. A refi ned methodology based on both quantitative and qualitative analysis makes the grading credible and reliable. The initiative is now used widely in Bangalore and the report card methodology has been adapted for use by major donor agencies and other developing countries. The process illustrates, once again, the importance of the wider context and the existing levels of capacity, as it requires “adequate fi nancing, time and interest on the part of the local residents, in addition to a conducive socio-political climate” (Lopes and Theisohn, 2004: 233). In Bangalore, the conditions were favourable, allowing the initiative to trigger a wider process of civil engagement and empowerment in the region. The example illustrates the powerful linkages between accountability, communication and information. These links are increasingly becoming recognized elsewhere. In both Nepal and Tanzania, the quality of communication activities constitutes a criteria used for assessing performance (UNCDF 2005). The examples also illustrate the need to recognize, value and reinforce non-fi nancial incentives, such as the incentive to respond to client needs. For instance, the report cards went from being an instrument of pressure to becoming an incentive for improved performance, as they “prompted the agencies themselves to respond positively to calls for improvement” (Lopes and Theisohn, 2004: 232). The UNDP (2006) is but one of the many contributors that argues that their impact might be stronger than fi nancial incentives in some cases and that they constitute alternative strategies in countries where it is fi nancially diffi cult to raise salary levels.


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5. POLICY SUGGESTIONS

The reasons for the success of the listed examples refl ect much of the policy advice and recommendations proposed by international agencies and individual authors to both governments and donors. They provide a pertinent résumé of the main issues related to incentives and policy advice, elements that have been touched upon, more or less explicitly, throughout this paper. These policy recommendations refl ect the extensive empirical research on incentives over the last two decades, initially through cases studies. These have in turn contributed to more systematic and quantitative research with the aim of drawing some general lessons and producing a number of theoretical insights. Within the development community, The World Bank pays particular attention to the issue and has provided much useful policy advice to countries involved in civil service reform. UN agencies, such as the World Health Organization (WHO) and the UNDP, also devote much attention to the issue (McCourt, 2006b: 163).

Encourage transparency, merit and professionalism

“Establish positive incentives. Motives and incentives need to be aligned with the objective of capacity development, including through governance systems that respect fundamental rights. Public sector employment is one particular area where distortions throw up major obstacles.” UNDP default principle for capacity development number 6 (Lopes and Theisohn, 2004: 13).

The key to capacity development in public organizations is to design incentives in order to attract and retain staff and enhance their performance. Most authors emphasize the importance of applying a variety of incentives that aim to create open employment frameworks, institutionalize the principles of merit and impartiality and professionalize civil servants. Some of the major incentives, policies or issues associated with these specifi c objectives are listed here in a brief summary:


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Box 7. Organizational performance: major objectives and incentives Transparency and open employment frameworks Detailed job descriptions matching tasks and skillsClear organizational mission and vision AutonomyPaying attention to equity issuesOpening up positions for competitionTransparent remuneration systems‘Rightsizing’ the civil serviceFocus on measurable targets and objectives in order to monitor progressPrinciples of merit and impartialityFair competitionMerit-based appointmentsAuditing appointment practicesPerformance managementPerformance-based remunerationEliminating perks Restore salary differentialsMonetising benefi tsProfessionalism Improving payMoving towards a minimum living wage and competitive remuneration Professionalizing HRMQuality leadershipCareer development opportunitiesTraining and skills improvementAnti-patronage rules and depoliticization of the civil serviceClient focus

Capacity for human resources management should be fostered within all government agencies and units in order to develop an enabling environment and incentives capable of retaining high quality staff. The provision of career development opportunities constitutes a key incentive in this context. Good leadership is crucial for the successful implementation of reform. Human capacity development should not only focus on developing knowledge and skills, but also on developing the values and attitudes of civil servants (Global Forum on Re-inventing Government, 2005). In addition to encouraging transparency, merit and professionalism, three general issues have recently been devoted specifi c attention by various agencies and authors:


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Policy suggestions

Foster capacity through HRM

“Reform must [...] be based on a recognition that people are at the heart of public service. As a result, managing human resources must be at the centre of any CSR [civil service reform] effort – not technology or market forces” Ul Haque, 2006: 29.

The need to develop capacity for and professionalize human resources management is emphasized by most authors. According to Saasa, “the administrative culture needs to be changed into a purpose-led managerial culture where the achievement of results becomes the dominant ethic” (2007: 20). UNDESA (2005) recommends that issues related to HRM be privileged by establishing performance management to accompany merit-based reform and foster quality leadership. The rationale for institutionalizing HRM is linked to the need for profound change on the organizational level, if individual attitudes and organizational culture are to change and become conducive for performance. HRM can be conceived as a concrete tool for managing incentives and policies that contribute to improved individual and organizational performance, and as an instrument for establishing a favourable organizational culture and changing the attitudes and values of civil servants. This corresponds to one of the UNDP’s (2006) guiding principles, namely embedding change messages in social and organizational culture, which is often a decisive determinant of the direction and pace of change. Hongoro and Normand argue in a similar vein that “incentive or payment packages should attempt to link payment with individual or group performance and should be assisted by supportive organizational and system changes if the desired provider behaviour is to be achieved” (2006: 1320).

Change needs to be managed. The question of leadership is therefore important, in terms of leadership within a public organization and political commitment to public sector reform processes. In other words, good leadership is crucial for the successful implementation of reform and for its sustainability. One of the ATP participants listed human resources, political commitment, institutional capacity and fi nancial resources as the key factors for creating an effi cient civil service. Capacity for human resources management may be fostered within public organizations and help develop a supportive environment


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for incentives. HR functions capable of privileging the question of incentives need to be fostered and encouraged. McCourt argues in a similar vein that

... there are arguments for a more strategic approach, in which pay and employment reform form part of a package of HRM reforms – which would include such elements as more professional recruitment and the introduction of performance management – all in the context of the strategic management of the public service (2006b: 186).

The author suggests a two-step normative approach to introducing HRM, with the fi rst stage focusing on integrity and a method of bureaucratic rule-following and the second focusing on performance through strategic human resources management. In other words, integrity should be addressed before performance. This corresponds to UNDP’s observation that “performance pay is likely to be resisted and should be a low priority to start off with” (n.d: 12). Therefore, a culture of rule-following has to be established before addressing the quality of staff management.

Assess external ‘pull’ and ‘push’ factors for reform

“Integrate external inputs into national priorities, processes and systems: External inputs need to correspond to real demand and be fl exible enough to respond to national needs and agendas.”UNDP default principle for capacity development number 7(Lopes and Theisohn, 2004: 13)

Reforming the civil service and introducing strategic management of the public service implies assessing and adapting to external ‘pull’ and ‘push’ factors. These factors may be assessed by using frameworks similar to the ones presented in Chapter 2. According to Grindle and Hilderbrand (1995), capacity development efforts should be designed on the basis of a comprehensive assessment of ‘pull’ factors and of the variables contributing to sustaining them on the individual, organizational, institutional and systemic level.

One important ‘push’ factor is linked to the challenge of retaining domestic human capital in general, and civil servants in particular. Reforming civil services is therefore an imperative and reform efforts


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Policy suggestions

need to be intensifi ed (Berg, 1993). Incentives should be compared to and inspired by fi nancial and non-fi nancial incentives on the global labour market. Ul Haque argues that “pay-scales must be attractive enough to compete for quality” (1999: 481). McLeod advises governments to rethink what constitutes ‘fairness’ in salary setting, implying that fairness is linked to salaries matching the wider labour market (2005: 10). Globalization and migration have made it necessary to take this factor into account (Lopes and Theisohn, 2004: 92). Also, incentives that reverse the brain drain effect may be designed. When it comes to non-fi nancial incentives, the UNDP recommends upgrading the quality and status of public services to counter any brain drain, arguing that “when higher professional standards are attained, qualifi ed staff will be prepared to work for the public services even though salary levels are lower than in industrialized countries” (Lopes and Theisohn, 2004: 124). This was supported by two of the ATP participants, who considered the upgrading of the status of working in the public sector as key to enhancing performance. This may be done by “giving them something to lose” – that is, enhancing the worth of being a civil servant. A third ATP participant, from Cambodia, explained that this is the case in his country. Working for the state is considered prestigious despite the poor salary levels. People are proud to be civil servants, “even if their pockets are empty”.

An important ‘pull’ factor for successful civil service reform is commitment and support, not only from leaders but also key public offi cials, the civil service as a whole, the wider public and other stakeholders. To maintain the momentum for reform, producing ‘good results’ is necessary in order to provide incentive for continued support (UNDP, n.d: 23). This depends on sustained leadership and ownership and the coordinated support of donor agencies in order to avoid fragmented development efforts, aid dependency and distortionary top-ups. The UNDP advises governments to

remember that donor support, (including UNDP’s), despite its good intentions, can have a perverse effect on the political economy by generating greater resistance to change in all areas of public management. Donor pressure to reform can free governments from the need to consult with and obtain policy support from their own citizens. In addition, donors tend to favour comprehensive reform


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programmes even where more limited, incremental approaches are advisable (UNDP, n.d: 23).

The UNDP (2006) proposes that distortionary incentives should be eliminated by aligning aid around national pay reform. Berg (1993) suggested that these issues need to be discussed in more detail among donors in order to create awareness and devise solutions. Fifteen years later, this issue remains an important one.

Carefully consider the scope and pace of reform

“Don’t rush. Capacity development is a long-term process. It eludes delivery pressures, quick fi xes and the search for short-term results.” UNDP default principle for capacity development number 1 (Lopes and Theisohn, 2004: 13).

The process of change should be realistic and set according to well-defi ned targets that are easy to manage (UNDP, n.d: 23). The World Bank (2008a: 75) argues that a better framework for civil service reform needs to be elaborated, including a set of indicators that can measure progress. Models should be adapted to the particular socio-economic context. When it comes to the African continent, many countries share similar experiences, challenges and objectives, such as institutional reform, economic growth and poverty reduction. These similarities underscore the importance of region-specifi c research and policy-making. Hongoro and Normand argue that “governments should adapt and not imitate compensation and incentive structures, given the evidence that effective incentive structures depend on local conditions and traditions as well as on universal principles” (2006: 1320). Most authors recommend a comprehensive approach to reform, “in which several parallel initiatives are undertaken at different points in the state system” (Saasa, 2007: 6). Huber and McCarty (2004) argue that successful bureaucratic reform depends on successful reform in other areas. However, according to McCourt, there is a trade-off to be made between a “comprehensive, but complex, approach to reform on one hand and a crude, but practicable approach on the other” (2006b: 187). When it comes to involving stakeholders, Schneider and Heredia (2003) suggest in a similar vein that reformers must fi nd the balance between a top-down and a bottom-up reform process, which allows for some consultation. Wescott (1999: 2), on the other hand, argues that


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Policy suggestions

some reform components, such as the setting of global targets, need to be introduced in an authoritative manner, while other components could be designed and introduced through consultation. Saasa clearly disagrees with this view, emphasizing that “lasting changes in administrative reform can only be achieved through a participative approach that harnesses the knowledge and commitment of a wide variety of interested parties through a dialectical process” (2007: 20).

Incentives for civil servants are an important instrument for capacity development. By linking incentives and personal motivation to specifi c organizational objectives, public organizations can move from a vicious circle of capacity erosion to a virtuous cycle of economic growth and bureaucratic effi ciency. However, it is only by paying attention to all of the issues listed above and moving from the micro to the macro level, that such a change can take place. Incentives must aim to encourage transparency, merit and professionalism. These may be introduced though a strategic HRM approach that also aspires to create a supportive organizational environment that reinforces the applied incentives. Incentives and civil service reform can be made more effective by paying attention to the infl uence of various ‘push’ and ‘pull’ factors, and the scope and pace of reform. Finally, and perhaps most importantly, the civil service and the administrative dimensions of public sector reform need to be devoted more attention. One of the main fi ndings of the World Bank’s Independent Evaluation Group on public sector reform (2008a) shows that performance usually improves for public fi nancial management, tax administration and transparency, but not for the civil service. Making the civil service an instrument for and not an obstacle to capacity development is therefore imperative.


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6. THE IMPACT OF INCENTIVES WITHIN THE CIVIL SERVICE ON CAPACITY DEVELOPMENT IN EDUCATION

A methodological note

As indicated by the title, the bibliography focuses exclusively on public administration or the civil service, excluding the school level. Ideally, the unit of analysis would be the ministry of education. However, literature on incentives within specifi c ministries has proved diffi cult to fi nd. Other sectors have therefore been included in order to enrich the bibliography. The relatively general nature and use of incentives allow this type of literature to provide insights that remain valid for public administration as a whole and across sectors. The bibliography contains, for example, several references related specifi cally to the health sector. This is an area in which the work on incentives is relatively recent, yet vast. Despite a few sector-specifi c issues, many of the challenges related to incentives are the same as in the education sector, such as providing effi cient service delivery in rural areas and issues related to HIV and AIDS.

All of the contributions or references have been read with a clear focus on incentives in mind, which is refl ected in the annotated bibliography. In the more general literature on the public sector, the annotations highlight the issues related explicitly to incentives and civil service reform, without ignoring the important links between these and the wider process of public sector reform.

Key issues identifi ed in the literature

The literature devoted to incentives within the public service, and especially within developing countries’ civil services, tend to focus on similar issues. However, the level and scope of analysis applied are often diverse and are not always made explicit. Descriptive case studies of the process and evolution of civil service reform, pay reform and incentive structures constitute an important strand of the literature. These have in turn contributed to more systematic and quantitative


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research with the aim of drawing some general lessons and producing a number of theoretical insights. This literature emerged in the aftermath of the widespread introduction of new public management (NPM) tools in the 1980s and 1990s, a trend often associated with structural adjustment programmes. This theoretical body of knowledge focuses to a large extent on general public sector reform in developing countries, in which civil service reform and incentives play an important role. The more recent literature related to incentives is found within the discipline of human resources management (HRM) and, much like NPM, encourages the public sector to apply and adapt to private sector management models. The literature gives much attention to these issues and how they may be handled on the African continent. This attention is mainly due to the urgent need for institutional reform, economic growth and poverty reduction in this region, and the fact that many African countries share similar experiences and face the same challenges concerning civil service reform.

As mentioned, much of the literature is relatively homogenous and some key issues can be identifi ed. These correspond more or less to the various levels and scope of analysis used throughout the literature, making the various approaches to the issue of incentives more explicit. These issues overlap to some extent, but they are distinct in the sense that they approach incentives in different ways. The fi rst issue approaches the notion of incentives as a given unit of analysis (“what are incentives?”) and situates incentives within the context of public sector reform and the ultimate goal of capacity development. The second focuses on the past failure of incentives and tries to give a diagnosis (“when and why do incentives not give the intended results?”). The third issue attempts to identify some commonly-used tools and good practices (“when and why do incentives work?”), going beyond individual and fi nancial incentives in order to include previously underestimated, indirect and non-fi nancial incentives, such as external accountability (strengthening ‘voice’) and organizational culture and learning (internalization of the organization’s goals).


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The impact of incentives within the civil service on capacity development in education

The notion of incentives

– Conceptualizing the role and place of incentives in developing countries, and in the context of public sector reform and capacity development

In most of the literature, the ultimate objective of incentives in developing countries is linked, more or less explicitly, to capacity development. The importance of incentives is explained by its place in a commonly used argument about how development can be promoted and sustained. This argument underscores the correlation between effective public institutions, poverty reduction and economic growth. Effective institutions are due to the effective use of individual skills, which occurs when individuals align their proper goals with that of the organization. Using incentives that create competition and accountability (such as merit-based pay and advancement, evaluations and a transparent work environment) is a way of aligning individual and organizational interests. In other words, incentives are a tool used to trigger a motivational reaction – that is, a change in human behaviour. There is thus a causal relationship between incentives and improved performance. In relation to capacity development, one can conceive of incentives as an intervening variable between acquired skills and knowledge and actual performance (that is, the application of acquired skills and knowledge).

The World Health Report 2000 defi ned incentives as “all the rewards and punishments that providers face as a consequence of the organizations in which they work, the institutions under which they operate and the specifi c interventions they provide” (Adams and Hicks, 2000). Another defi nition identifi es an incentive as “a particular form of payment intended to produce a change in behaviour”. The notion of incentives is often used interchangeably with the notion of motivation, although the former is the cause and the latter the effect. Motivation is linked conceptually to capacity and is commonly defi ned as “the ability of people, institutions and societies to perform functions, solve problems and set and achieve objectives” (UNDP, 2006: 5). Theoretically, incentives are often situated at the nexus of development theory and human resources management theory. The notion of incentives is multi-disciplinary and draws on additional academic disciplines such as sociology and economics.


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Diagnosis: the causes and effects of negative incentives and failed civil service reform

– The general failure of past civil service reforms linked to policy strategy (implementation) and content (lack of understanding about how incentives work)

In the context of public sector reform, incentives play a central role in the three major types of reform: civil service reform (the management of human resources), accountability reform (enhance transparency, oversight and control) and managerial reform (contracting-out, decentralization and results-based management). Accountability and managerial reforms have become widespread, although it is uncertain to what extent incentives such as citizens’ charters or increased autonomy as a result of decentralization actually contribute to improved performance.

Civil service reform has generally been considered the most diffi cult to implement and institutionalize, because of the limited fi nancial resources available and the lack of political commitment. ‘Rightsizing’ the public sector through the reduction of the size of the civil service has proved to be politically diffi cult to achieve. The lack of political commitment refers to a different type of incentive: politicians’ lack of incentive to introduce incentives for the civil service. The reticence towards reform may also be linked to existing practices of patronage and bureaucratic politicization. Huber and McCarty (2004) illustrate that there is strong incentive for politicians to politicize the bureaucracy when bureaucratic capacity is low and that when bureaucrats become politicized, the incentive to reform bureaucracy is low.

As a result, public servants’ salaries have remained low, the criteria for recruiting or promotion unjust and the compression of wage levels has remained unchanged. In short, the incentive necessary in order to create a professional, neutral and effective civil service has not been in place. Problems of patronage and corruption are widespread in many countries and represent important obstacles for public reform in general. In this respect, it is interesting to note that some authors do not consider civil service reform as an integral part of public sector reform. They conceive of civil service reform rather as an instrument preceding public sector reform, since no reform can be implemented


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without the effi cient management of human resources already in place. Most authors do not make this distinction, although the question of the sequencing of reform is discussed widely and they tend to prioritize civil service reform.

The majority of authors underscore the importance of context and capacity assessment when designing and implementing incentive packages and civil service reform. They warn against the blind application of models without taking into account the political context and history of a particular country and its public administration. The decompression of salary levels and performance-related pay, for example, has proved particularly diffi cult to implement in countries where previous communist regimes have fostered strong egalitarian norms. This is true for many African countries and Eastern Europe. The importance of ownership of the reform process is also emphasized.

Ul Haque is one of the authors who goes beyond the strategy and looks at the very content of civil service reform and the theory on incentives. According to these authors, there is a lack of knowledge about the theory on incentives in organizations (Ul Haque, 2006: 3). In other words, incentives constitute an under-researched area. By drawing on organization and management theory, it may be possible to shed some light on what Ul Haque refers to as ‘the missing link’ and McLeod as ‘the missing sector in sectoral studies’.

Human resources management: incentive schemes as tools for capacity development

– Linking incentives to performance and introducing non-fi nancial incentives, such as strengthening ‘voice’ and demand, and promoting organizational culture, decentralization and training

The main types of incentives are linked to merit – that is, recognizing, rewarding and appraising performance. In the civil service, the introduction of merit-based incentives is often an important part of broader reform efforts. Within the public sector, incentives are therefore closely linked to the pursuit of merit and the desire for reform. Traditionally, this has been refl ected in the focus on individual and fi nancial incentives to face the challenge of low salaries. However, incentives are also linked to measures aimed at creating competition


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and accountability, both internally and externally, in order to enhance effi ciency and transparency. Externally, the public service has to be able to compete with the private sector for skilled human resources and should be accountable to the public. Internally, civil servants should participate in fair competition for merit-based pay and be accountable to its hierarchy.

The SASE scheme in Tanzania (OECD/DAC, 2006: 27) is a good example of a recent civil service reform. It is often referred to in the literature for two reasons. Firstly, it is an innovative reform, situated between the ‘divisive and uncoordinated’ top-up schemes of the past and fully-fl edged public service pay reform. Secondly, as with most innovations, it has not been a problem-free process. It is therefore interesting to assess its advantages and disadvantages. The objective of the SASE scheme was to target the public servants closest to and most infl uential in the reform process. The assumption was that by enhancing the salaries of key public servants, the reform process would regain momentum. According to the SASE, general pay reform would be introduced progressively. Some of the problems encountered were linked to the discontent of non-SASE offi cers, as well as political opposition both internally and from external donors.

Tools such as performance-related pay, non-monetary benefi ts and top-ups are also discussed widely in much of the literature. PRP is a useful tool but transparency, trust and clear promotion mechanisms should already be in place prior to its introduction. If not, PRP can have an effect contrary to its intentions. Top-ups are used widely by donor agencies in order to attract skilled staff to their projects. However, they often contribute to public sector capacity erosion and brain drain. The sequencing, content and techniques of the implementation of performance management systems, pay reform and effi ciency as the basis for promotion are other issues that are addressed and analysed. Incentives aimed at strengthening external accountability – that is, accountability to citizens – are often used in parallel to internal accountability mechanisms such as evaluation, control and regulation. User evaluations, citizens’ charters and ombudsmen are effi cient tools for strengthening ‘voice’ and correspond to the NPM approach in which citizens are regarded as customers, as well as to the responsive governance approach, according to which citizens


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should be empowered participants in public activities. Such ‘voice’ mechanisms may translate into a societal motivation for enhanced public performance by providing incentives to respect the rules and strive for effi cient service delivery.

The literature also evokes organizational incentives, defi ned by the UNDP as “the reason for staff to join an organization, and the way an organization rewards and punishes its staff” (UNDP, 2006: 8). Grindle and Hilderbrand (1997) link these incentives to organizational culture. As mentioned, individual incentives temporarily align an employee’s interest with that of the organization. Incentives constitute a psychological contract between the individual and the organization. According to Grindle and Hilderbrand (1997), organizational incentives inherent in some organizational cultures (such as Grindle and Hilderbrand’s emphasis on mission/mystique) go beyond alignment and strive to make individuals internalize the organization’s goals. Better teamwork and dialogue constitute examples of organizational incentives. In Singapore, Work Improvement Teams allowed groups of staff to openly discuss obstacles to quality and to devise practical solutions for service improvement (Ul Haque, 2006: 26). The organization’s clarity of mission and objectives may enhance its performance, as may greater autonomy. In this respect, decentralization is interpreted as necessary not only for the sake of distributing political power and increasing local accountability, but also to provide appropriate incentives for economic effi ciency. In addition, training and skills enhancement can provide important incentives for attracting and retaining skilled professionals and make the public sector competitive with the private sector.


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ANNOTATED BIBLIOGRAPHY

References are listed in alphabetical order.

Adams, O.; Hicks, V. 2000. Pay and non-pay incentives, performance and motivation. Prepared for WHO’s Global Health Workforce Strategy Group, December 2000. Retrieved 16 July 2009 from:www.who.int/hrh/en/HRDJ_4_3_02.pdf

Although this 25-page article focuses on the health sector, it addresses important issues related to incentives that can also be of use in other public sector areas. It outlines a round table discussion prepared for WHO’s December 2000 Global Health Workforce Strategy Group. It provides various defi nitions of the concept of incentives, and a typology of fi nancial and other types of incentives. The paper also provides a typology of key payment mechanisms and their expected results. By linking incentives and personal motivation to specifi c organizational objectives, the authors review ways in which incentives can lead to changes in behaviour (improved performance) and how incentives can be made more effective. Although the paper recognizes the importance of organizational and institutional incentives, it remains focused on the individual level. However, the authors do make the distinction between internal and external incentives at the organizational level: while the former refers to autonomy and staff management, the latter refers to regulation and accountability. Non-fi nancial incentives for motivation are discussed widely, such as prestige, work environment, changes in management structure and decentralization. Based on a comprehensive literature review, some key issues are identifi ed and discussed. These include matching incentives to different categories of staff, avoiding confl ict between these categories, and matching incentives to organizations’ strategies and objectives. The authors give relevant examples of incentive packages for human resources issues from country case studies. The discussion remains rather theoretical, but makes reference to relevant examples that are also useful beyond the health sector.


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Annotated bibliography

Bana, B.; McCourt, W. 2006. “Institutions and governance: public staff management in Tanzania”. In: Public Administration and Development, 26, 395-407.

The paper attempts to illustrate how Tanzania’s administrative institutional framework has affected the way the country’s civil service is managed. The authors offer a relatively detailed description of post-independence public sector reform efforts, and the remaining legacy of bureaucratic politicization and egalitarianism. Civil service legislation and the agencies responsible for hiring public servants are assessed. They both refl ect the single-party era: the President of Tanzania has considerable direct powers when it comes to appointments and dismissals, and most civil servants do not consider the appointment procedures independent. Infl uencing factors in appointments include ‘who knows who’, social connections, bribery, patronage and tribal affi liation. The authors encourage the establishment of an independent bureaucracy capable of fostering civil service capacity and confi dence, and in turn, serving development objectives. The paper does not deal with incentives per se, but illustrates how to analyse an institutional framework within its politico-historical context. Despite political commitment to reform, the formal and informal power confi gurations are diffi cult to change. An autonomous bureaucracy can provide an incentive for working more effi ciently towards development goals.

Berg, E.J. 1993. “Getting the work environment right”. In: Rethinking technical cooperation – reforms for capacity building in Africa (pp. 195-242). New York: Regional Bureau for Africa, UNDP and Development Alternatives.

This chapter considers the issue of incentives that are crucial for effi cient capacity development via technical cooperation. Incentives are conceived of not only as necessary for the application of skills and knowledge in a given position, but are equally important for civil service employees to acquire new skills and actually learn from technical cooperation projects, such as training. Low salaries and high turnover in the public sector have proved futile for such projects. The public sector on the African continent is far from effi cient, notably because of two factors: the deterioration of basic management systems and inadequacies in salary and structure. As for the latter, the failure of


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donors’ efforts is linked to the following paradox: technical cooperation aims to improve organizational capacity, but its success depends to a large extent on the existence of a certain level of organizational cohesion and stability. The inadequate salary incentives are linked to governments privileging employment growth over income growth for public employees, the result being a fall in wages (the fall was in fact more dramatic for skilled workers than for unskilled ones) and the growing gap between effort or responsibility and reward.

The author also describes three alternative strategies used by donors to confront these challenges – that of donor payment of local salaries, pay and employment reform and general administrative reform. However, none of these strategies has proved to be particularly successful. The paper proposes three complementary strategies that aim to improve the work environment and thus, capacity development: confront the salary supplements issue by hiring only nationals for project-related jobs and discuss the issue in more detail among donors, intensify efforts to reform civil services and downsize the public sector by accelerating the processes of deregulation and privatization.

Caiden, G.E.; Sundaram, P. 2004. “The specifi city of public sector reform”. In: Public Administration and Development, 24, 373-383.

The article uses the example of recent public sector reform efforts in India in order to illustrate the complexity of such reform and the need to redesign, alter and adjust reform models to the local context. Whereas varying local conditions need a tailored approach, the challenges in initiating reform are often similar: the erosion of public capacity, widespread corruption, as well as the need to attract and retain talent are but a few issues that need to be addressed. Unfortunately, public sector reform is risky and rarely succeeds. It constitutes a major investment that takes time, is dependent upon political and public support and needs periodical monitoring to ensure progress. Most of today’s reform elements are inspired by the new public management ideology and toolbox. Tools often used include the reorientation of state administration towards more competition, a reduction in administrative fragmentation and the rationalization of manpower. Performance may be enhanced by improving external accountability


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through improved public access to information, decentralization, transparent rules for human resources management, and independence from political interference. Citizens’ charters and surveys of service delivery are useful strategies for strengthening the responsiveness and integrity of the civil service. The protection of whistleblowers is a useful and effective anti-corruption measure. Parallel attention needs to be devoted to direct incentives aimed at changing civil service attitudes towards reform. Diversity is another key issue; equal opportunities for public sector employment may transform the public sector into a more attractive employer.

Court, J.; Kristen, P.; Weder, B. 1999. Bureaucratic structure and performance: fi rst Africa survey results. Tokyo: United Nations University.

The paper presents the results of a survey conducted in 1998 on incentives and bureaucratic structures in Africa (the African Bureaucratic Structure Survey). One of the aims of the survey was to renew the available quantitative data on the subject. Most research in this area has previously been conducted in the form of case studies, which makes it diffi cult to explore systematically the link between bureaucratic performance and economic growth, and the institutional characteristics that are conducive to improved bureaucratic performance. Key issues included in the survey (and the resulting regression analysis) were appointment and advancement based on meritocracy, salary scales equivalent to responsibility, adequate wages, career structure, transparency and accountability. Large differences in structure and performance were found across the African continent when it came to bureaucratic corruption, effi ciency of service provision and diversity in the civil service. The African countries were then compared to other developing countries. The results imply that incentive structures play similar roles in African countries and elsewhere in that enhanced performance is linked to organizational autonomy, good career opportunities and good salaries. The paper confi rms empirically some of the assumptions made by policymakers and human resources managers in developing countries – that incentives matter.


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OECD/DAC. 2006. The challenge of capacity development: working toward good practice. Paris: OECD. Available at:www.oecd.org/dataoecd/4/36/36326495.pdf

This publication details the existing knowledge and previous lessons drawn about capacity development, and offers valuable advice for developing countries. The paper is quite general, but does offer some fi tting illustrations that help conceptualize the process of capacity development. The focus is on capacity development of the public sector as a whole, though some attention is given to the question of incentives: poor public service conditions are evoked as a major reason for government ineffectiveness and the fl ight of qualifi ed staff to other countries (p. 17). The paper describes the increasing use by donor agencies of ‘power analysis’ or ‘institutional analysis’ in order to be able to foster an enabling environment for capacity development (p. 21). Such tools can be useful in understanding the incentive structures (often informal ones) that exist in and regulate a given sector. It is only by fully understanding the functioning of such structures that institutional and organizational change can take place. On the individual level, negative or perverse incentives within the public sector have led to capacity erosion. Yet these negative incentives are also created from the outside – by recruiting local personnel (and offering higher salaries), donors and NGOs often contribute to the skilled professional defi cit in the public sector. One solution is to harmonize salary levels under the leadership of the government. Tanzania and its Selected Accelerated Salary Enhancement scheme (SASE) is a case in point (p. 27). The document evokes the idea behind it, its progressive implementation and the problems encountered, in terms of employees, political opposition and external donors. Finally, establishing positive incentives is listed as a default principle for capacity development.

Economic Commission for Africa (ECA). 2003. Public sector management reforms in Africa: lessons learned. Addis Ababa, Ethiopia: ECA Development Policy Management Division.

The paper explores the specifi city of the African political and economic context in relation to public sector reform. It traces the evolution of public sector reform frameworks, from structural adjustment programmes to good governance and institutions, as key to


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development. The concepts and ideas related to new public management (NPM) are described and a set of NPM tools is considered in detail with relevant examples from African countries. Administrative reform, civil service reform and organizational incentive structures are considered part of the NPM strand that emphasizes managerial empowerment and organizational restructuring. The objectives of such reforms are increased effi ciency, performance and accountability. The paper considers NPM strategies such as performance contracting, public reporting and citizens’ charters in order to strengthen the demand for an accountable and effective public administration. Organizational mechanisms aimed at strengthening the incentives for public service delivery (and not via empowering the service users – that is, ‘voice’ or ‘choice’) are also considered. Initiatives such as training (to improve skills and change attitudes), performance management and pay reform are promising organizational capacity development efforts. Such efforts might counter challenges such as the constraints of multiple accountability and declining public service ethics. Finally, the paper offers concrete recommendations concerning how NPM tools and themes can be useful and applied successfully in the African context. Enhancing ethics and accountability, and measuring and monitoring public service effi ciency, are among the emphasized themes.

Global Forum on Re-inventing Government (GFRG). 2005. Capacity development workshop: building the human capital in the public sector. Paper presented at a GFRG workshop on building human capital in the public sector, in Mexico, 5-6 November 2003.

The paper outlines the fi ndings of the workshop on building human capital in the public sector. The workshop looked at global trends in the strategic management of human capital, leadership development and capacity building of staff. The same factors leading to a brain drain are used to explain the lowering of prestige and employment in the public sector. The objectives of civil service reform are linked to considerations of effi ciency, responsiveness and accountability. Employment frameworks need to become more open, ensuring impartiality, merit principles and professionalism. However, developing countries need to be cautious when adopting civil service reform models from countries that are more advanced economically. Instead, they should adapt such models to the particular socio-economic context. Capacity for human


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resources management should be fostered within all government agencies and units in order to develop an enabling environment and incentives capable of retaining high quality staff. The provision of career development opportunities constitutes a key incentive in this context. Good leadership is crucial for the successful implementation of reform. Human capacity development should focus not only on developing knowledge and skills, but also on developing the values and attitudes of civil servants.

Grindle, M.S.; Hilderbrand, M.E. 1995. “Building sustainable capacity in the public sector: what can be done?” In: Public Administration and Development, 15, 441-463.

The article builds on a study conducted in six developing countries in order to assess a framework elaborated for identifying capacity gaps and designing fi tting interventions to fi ll these gaps. The focus of the study is on public sector organizations. The framework attempts to identify factors that constrain or facilitate the ability of these organizations to perform their development tasks effectively, effi ciently and in a sustainable manner. The study goes beyond the traditional focus on the organizational level – assessing training activities, and institutional rules and structures. In fact, the analytical framework has fi ve levels: the action environment, the institutional context of the public sector, the task network, organizations and human resources. Constraining or facilitating factors are identifi ed on each level in relation to a number of organizations. By assessing capacity gaps at multiple, interacting levels, the authors demonstrate that the traditional focal points need to be called into question. In many organizations, the political, economic and social context will continue to hinder organizational effectiveness despite attempts at organizational strengthening. The action environment (such as a low level of human resources development and social confl ict) is a critical dimension for capacity development. Organizational culture (see the following article) seems to matter more for enhanced performance than administrative structure, fi nancial incentives and control mechanisms: standards of good performance, leadership, recognition and a sense of mission can explain commitment to organizational goals independent of salary levels. Open recruitment procedures are clearly correlated to employee performance. Training focused on skills and technology is


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at times less motivating than being able to use skills in a meaningful manner and a feeling of being able to contribute to the organization. These fi ndings indicate than capacity development efforts should be designed on the basis of a comprehensive assessment of capacity gaps, and of factors contributing to sustaining them.

Grindle, M.S.; Hilderbrand, M.E. 1997. “Divergent cultures? When public organizations perform well in developing countries”. In: World Development, 25(4), 481-495.

The study looks at the factors contributing to organizational performance in developing countries. Previous research and reforms aimed at enhancing public sector performance have tended to focus on macro-institutional initiatives such as improving civil service salaries and reducing the size of the public sector. In response to the general failure of these initiatives, the authors suggest that organizational culture may constitute the ‘missing ingredient’ in explaining why some organizations perform better than others, despite the similar political, economic and social context of developing countries. Organizational culture is defi ned as “a shared set of norms and behavioural expectations characterizing a corporate identity”. The concept has been applied widely to the private sector in developed countries, but not in the analysis of public organizations in developing countries, the autonomy of which is limited and the context less than favourable. Based on a wider study on public sector capacity, the authors identify a number of ‘good’ and ‘poor’ performers and assess varying explanatory variables. Whereas the types of tasks, salary levels and client demands fi nd little or no support for organizational performance, key variables are a sense of organizational mission, management style, performance expectations and autonomy. The organizational mission helps employees internalize the organization’s goals. Performance expectations are linked to the capacity to manage incentives for good performance. Autonomy is a facilitating factor in the development of an organizational culture. These variables, taken together, form an implicit contract between leaders and employees that works to stimulate a positive output. The variables are interdependent and, taken together, are interpreted as representative of the wider concept of organizational culture.


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Grindle, M.S.; Hilderbrand, M.E. 2006. “Modernising town hall: capacity building with a political twist”. In: Public Administration and Development, 26, 55-69.

The paper assesses the importance of politics for successful capacity building in a decentralized context. Based on a study of municipal governments in Mexico, the authors argue that contrary to expectations and assumptions about the political neutrality of capacity-building efforts, political circumstances – that is, politicians’ incentives – are decisive for the successful implementation of capacity-building initiatives. The fi rst part of the paper takes a closer look at the general content of such initiatives, such as reorganizing town hall, altering the profi le of those appointed to public offi ce, providing training and technical upgrading, and introducing performance standards. The training was typically oriented towards effective service delivery, team building and morale boosting. New systems for measuring performance were also introduced. In the second part of the paper, the author explores the political motivations for initiating, implementing or withdrawing such capacity-building reform. Democratization gave more opportunities for the alternation of political elites and for politicians with ‘good governance’ concerns to enter the local arena. When in offi ce, reforms were introduced rapidly in consideration of the relevant electoral calendars. Finally, reforms were facilitated or constrained by the political rules of the game and the available room for manoeuvre. Reform such as civil service incentives thus ultimately depends upon politicians’ incentives to commit to them. Capacity-building activities become instruments of the leadership, which may facilitate their immediate implementation, but their institutionalization over the long term is endangered by changes in the political leadership.

Hongoro, C.; Normand, C. 2006. “Health workers: building and motivating the workforce”. In D.T. Jamison, J.G. Breman, et al., Disease control priorities in developing countries. Washington, DC: The World Bank Group and New York: Oxford University Press. Retrieved 16 July 2009 from:www.ncbi.nlm.nih.gov/books/bv.fcgi?rid=dcp2.chapter.10283

The chapter emphasizes the importance of sound human resources policy in order to achieve wider policy goals. Brain drain, the lack of


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human resources in rural areas and competition from the private sector are core challenges within the health sector in developing countries. The lack of technical skills, low motivation and poor support networks are additional problems. The authors focus on how the health sector can build and improve human resources capacity, and draw on relevant examples from various African countries. They link explicitly the use of incentives to motivation in order for health workers to accept and stay in posts, and to choose to train and increase their skills. Health workers value fi nancial and non-fi nancial incentives. The paper illustrates the complexity of health HR problems at different levels and the diffi culty of matching these various issues to concrete incentives. While most HR approaches tend to focus on the individual level, individual performance is linked closely to the wider context, at the organizational and systemic levels. The availability of resources, organizational autonomy, level of bureaucracy and policy context are relevant examples. Using these three levels of analysis, the paper considers the importance of policies, management and incentives. It illustrates how incentive packages, using a combination of different types of incentives, have been used successfully in so-called ‘vertical programmes’ for priority diseases. It provides a useful typology of incentives at the different levels and illustrates the importance of understanding the socio-economic context, culture, history and norms when designing incentives. Decentralization, for example, may constitute an incentive by creating more autonomy. However, unless the proper investment in new management skills and capacities is made, career structure, job security and transparent management may be endangered. The authors also present a summary of the structure, objectives and results of incentive packages used in selected countries. Empirical evidence of payment methods and group incentives are presented, as well as the infl uence of system capacities and sustainability issues (such as inadequate funding, lack of technology, political commitment and thriving private sectors) on incentives. Cambodia’s New Deal Experiment launched in 2000 is presented in detail. Finally, the authors provide some general advice for governments and propose possible research areas.


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Huber, J.D.; McCarty, N. 2004. “Bureaucratic capacity, delegation, and political reform”. In: The American Political Sciences Review, 98(3), 481-494. The authors present and analyse a model of delegation and

policymaking in countries where bureaucratic capacity is low. Via this model, a number of propositions are deduced which go against much of the conventional wisdom about delegation in developed countries with ideal-type ‘Weberian’ bureaucracies. The model exemplifi es the importance of conducting research aimed specifi cally at bureaucracies in developing countries to understand and enhance the reform processes aimed at development and economic growth. According to the model applied, low bureaucratic capacity creates a vicious circle: low bureaucratic capacity provides few incentives for civil servants to do their work effi ciently or for politicians to undertake reform. The authors make the distinction between information (knowledge) and capacity (applying knowledge), and consider the latter as key to development. They fi nd that there are strong incentives for politicians to politicize the bureaucracy when bureaucratic capacity is low, and that when bureaucrats become politicized, incentive to reform bureaucracy is low. These fi ndings suggest that reform strategies should be comprehensive: reforming courts to enhance enforcement, reforming bureaucracies to enhance capacity, and reforming legislatures or executives to enhance technical expertise are interdependent strategies. Successful bureaucratic reform depends on successful reform in other areas.

Kamoche, K. 1997. “Competence-creation in the African public sector”. In: International Journal of Public Sector Management, 10(4), 268 - 278.

Efforts aiming to reform the public sector and enhance performance should focus on improving human resources management within public organizations. It is only when the importance of a well-functioning human resources function is recognized, and a coherent and comprehensive strategy to attract, select and retain skilled professionals is elaborated, that enhanced public performance will occur. HRM is thus central to the question of skills development and the management of expertise. Ultimately, HRM may provide solutions to structural and institutional challenges to reform by identifying the organization’s core strategic objectives and determining the


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human resources competencies required. HR functions or institutions capable of privileging the question of incentives need to be fostered and encouraged. The author raises doubt about the use of training as a means to improve individual performance, but recognizes that it is often used as an incentive within the public sector. Kamoche introduces the notion of competence management when referring to the process of cultivating a requisite stock of knowledge within an organization that draws on and reinforces the organization’s core strategic activities. By using competence management, managers will become more sensitive to introducing incentives into appraisal and rewarding policies in order to enhance the capacity of attracting and retaining employees, and ultimately, enhancing productivity.

Kayizzi-Mugerwa, S. (Ed.) 2003. “Incentive structures and performance in the public service”. In: Reforming Africa’s institutions: ownership, incentives, and capabilities. Tokyo: UN University Press.

The volume explores the public sector’s capacity to internalize reform in order to achieve economic growth and poverty reduction – that is, development. Part two of the volume recognizes that African bureaucracies are simultaneously part of the problem and the solution, and focuses particularly on the role of civil service pay reform and incentives. The fi ve case studies (French-speaking West Africa, Malawi, Kenya, Nigeria and Mozambique) offer rich descriptions and pertinent analyses of the earlier reform attempts in this area, their contents and impact, as well as contemporary challenges and progress. They illustrate and underscore the common challenges these countries have to face. In general, reforms were triggered by economic and political crises. The reforms have evolved over time, and the distinction between fi rst and second generation reforms is useful. First generation reform aims at decreasing the size of the public sector and increasing the salaries of the remaining civil servants. Whereas the former was partially achieved through the removal of ghost workers, the latter has been fi nancially impossible for many countries. Second generation reform is linked to the introduction of management and accountability systems. These are diffi cult to implement due to the limited success of fi rst generation reform. In general, incentives and


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structures remain inadequate. Other obstacles are also considered, with fi nances and politics cited as the most important ones. In Nigeria, the issue of corruption is discussed widely. Lack of accountability is a major problem in Malawi. The observation that some reforms, such as those based on accountability, cannot be imposed, is commented on. Such reform may have to be internalized to some degree by civil servants in order to lead to improved performance. Important steps are being taken to deal with this situation in Malawi, such as the creation of an ombudsman. The key to an effi cient and accountable civil service rests on three main interventions: competitive remuneration, an altered (decompressed) salary structure and performance-based promotion.

Kiragu, K.; Mukandala, R. 2003. Tactics, sequencing and politics of public service pay reform in developing and middle income countries: lessons from sub-Saharan Africa. Nairobi: Pricewaterhousecoopers and Dar es Salaam: University of Dar es Salaam. Retrieved 8 April 2008 from:www1.worldbank.org/publicsector/civilservice/Mayseminar/PayReformStudy.pdf

The study was commissioned by DFID and the World Bank Africa Region Public Service Reform and Capacity Building Unit. It analyses pay reform strategies since 1990 in eight African countries – Benin, Botswana, Burkina Faso, Ghana, Senegal, Tanzania, Uganda and Zambia. The fi rst chapter provides a useful introduction to the politically sensitive issue of public sector pay reform in developing countries. The argument is made that adequate levels of pay are crucial to sustaining the motivation, performance and integrity of public servants. In a similar manner, low pay demotivates and stimulates corruption. However, lack of resources, competing policy objectives and the political rules of the game often prove to be important obstacles for implementing pay reform. Chapter 2 gives an overview of comparative pay trends (wage levels and pay structures), while Chapter 3 considers the techniques, tactics and sequencing of pay reform in detail. The demonstrated instability of pay levels across the countries included in this study is linked to the multiple tools and techniques available to governments. In many cases, contradictory approaches to pay reform are applied, making the task all the more diffi cult. In order to map the various tools, the authors were able to identify 11 main approaches or techniques.


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Job evaluation, salary re-grading, market benchmarking (one relevant example of this is Tanzania’s SASE scheme) and performance-based salary adjustments are among the tools discussed in this respect. In addition, two models of pay reform are presented – a political and a rational one. Chapter 4 considers the role of politics in pay reform and Chapter 5 presents a general framework of a politically responsive strategy to pay reform, which includes moving from the previously mentioned political pay reform model to a rational one. The remaining chapters (6-12) are detailed case studies of various approaches to and processes of pay reform in Benin, Botswana, Burkina Faso, Ghana, Tanzania, Uganda and Zambia. The study is comprehensive, detailed and relevant. The theoretical arguments are supported by rich empirical evidence and give considerable insight into the use and role of fi nancial incentives, and the numerous opportunities and challenges inherent to pay reform.

Lopes, C.; Theisohn, T. 2003. “From perverse to positive incentives” (Chapter 3) and “ Re-examining the layers of capacity development” (Chapter 4). In : Ownership, leadership and transformation: can we do better for capacity development? London: Earthscan Publications.

The fi rst part of this volume discusses a number of issues related to capacity development. Chapter 3 deals with both negative and positive incentives. It discusses how incentives can lead to development, the role of incentives within the public service, and the problems of corruption and brain drain. One of the UNDP’s fundamental principles for capacity development is to make incentives and motivation converge in order to create capacity development. Chapter 4 goes beyond incentives to discuss issues related to developing human resources, institution building and the participation of civil society. Attitudes, established interests and power confi gurations constitute important obstacles to reform that incentives may help change and evolve. Incentive schemes that are favourable to development need to be established and those that are counterproductive need to be abolished. Ultimately, successful incentive schemes refl ect a society respectful of human rights and the rule of law. In the absence of such incentive schemes and in order to protect their proper capacity development efforts, donor countries do not hesitate to offer top-ups to local employees. However, this type


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of compensation contributes greatly to the public sector brain drain and is counter-productive to capacity development in the long run. Harmonized incentive schemes are now becoming the norm in order to deal with this problem.

The authors also discuss other issues linked to incentives and the presence and infl uence of donor agencies in developing countries. The second part of the volume presents a large number of case studies (56), and these particular experiences offer some relevant lessons concerning capacity development. The case studies dealing with incentives and accountability include the following: in India (p. 232), user evaluations and the grading of public services have substantially improved service delivery and performance. Also in India, public hearings have been introduced as an instrument against corruption (p. 234). The Philippines have introduced an accenture strategy in order to attract and retain local competences (p. 267), and to encourage civil society to monitor public expenditure (p. 270). Tanzania has experimented with ways to make salaries sustainable incentives for public offi cials (p. 292).

Mamman, A.; Rees, C.J. 2007. Towards the understanding of development policy failures through the eyes of management and organizational theories: research agenda. Manchester: University of Manchester. (Institute for Development Policy working paper). Retrieved 10 April 2008 from:www.sed.manchester.ac.uk/idpm/research/publications/wp/mid/documents/mid_wp18.pdf

The paper addresses issues of policy implementation by drawing on organizational and management theories in order to explain why sound policies do not always deliver desirable outcomes. The focus is on the capacity of organizations in charge of poverty reduction. According to the authors, one of the reasons is that the institutional level has been privileged at the expense of poverty reduction interventions at the organizational level. However, human and organizational capacities are also crucial in order to achieve poverty reduction. Successful poverty reduction initiatives depend on the commitment of key offi cials, staff salaries and an organizational culture built on openness and innovation. Research in this area has been neglected for a long time, with the exception of the private sector, where the links between


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management practices, organizational characteristics and outcomes have been studied meticulously. This body of knowledge can also be applied to the public sector and provides relevant insight into successful capacity development. In order to guide future research, the authors present a number of relevant research questions, including: what are the infl uences on the willingness of organizations and individuals to deploy their capacities to pursue poverty reduction objectives?

Mathauer, I.; Imhoff, I. 2006. “Health worker motivation in Africa: the role of non-fi nancial incentives and human resource management tools”. In: Human Resources for Health, 4(24). Retrieved 16 July 2009 from:www.human-resources-health.com/content/pdf/1478-4491-4-24.pdf

The study assesses the role of non-fi nancial incentives for motivation in the health sector in Benin and Kenya. Several studies have illustrated the limited impact of fi nancial incentives in the health sector; more money does not automatically lead to higher motivation. The motivation of health workers in developing countries is generally low, and evidence suggests that both fi nancial and non-fi nancial incentives should be used in order to enhance motivation. Non-fi nancial incentives are those that involve no direct transfers of monetary values or equivalents. Motivation is defi ned as “the willingness to exert and maintain an effort towards organizational goals”. It is a result of interacting variables on multiple levels, such as individual self-effi cacy, goals, values and motives; organizational determinants such as the work environment and organizational culture; and cultural norms and values. Motivation itself is distinguished by two ‘qualities’: ‘will do’ and ‘can do’. The study fi nds that the ‘will do’ dimension (vocation and professional conscience) is stronger in explaining health workers’ motivation and affects the ‘can do’ dimension. The study is based on interviews and a quantitative analysis. The results show that health workers are strongly guided by their conscience and professional ethos, and that a lack of resources and supplies becomes a negative incentive for motivation. This should be corrected by introducing adequate human resources management (HRM) tools that acknowledge health workers’ professionalism and enable them to meet their personal and organizational goals. Good leadership, supportive


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management, recognition, career development, unpaid holidays, equal opportunities for training, active staff participation in decision-making, and team-based performance promotion are examples of such tools. More attention needs to be devoted to the impact of incentives on staff motivation, especially non-fi nancial ones, in order to assess systematically in what ways they affect performance levels.

McCourt, W. 2001. Public appointments: from patronage to merit (Working Paper 9). Manchester: Institute for Development Policy and Management, University of Manchester.

The paper explores the implications of moneyless corruption – ‘patronage’ – and how it can be replaced in a sustainable manner by its more desirable counterpart, merit. The challenge is relevant for many developing countries and is of theoretical interest because it lies at the intersection of the development debate and good practice in human resources management. According to the author, strengthening appointment on merit is a neglected, yet effi cient way of improving public effectiveness. Merit matters because it is linked directly to bureaucratic capacity, anti-corruption, individual performance and accountability. McCourt also draws on various theoretical perspectives on patronage. The political science perspective emphasizes institution building and strengthening voice mechanisms, while organizational psychology has produced much knowledge about how appointments based on merit can be implemented. Anti-patronage rules, a clear defi nition of merit, auditing appointment practices and detailed job descriptions matching tasks and skills, are a few steps that may be taken in order to encourage the use of merit. In developing countries where a culture of merit has not been nurtured (“culture is performing some of the functions of structure”), institutional arrangements may particularly need to be strengthened. Nepal and its public service commission is a case in point.


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McCourt, W. 2006a. The human factor in governance: fi ndings and prospects for development (Paper 16). Manchester: Institute for Development Policy and Management, University of Manchester. Retrieved 13 April 2008 from:www.sed.manchester.ac.uk/idpm/research/publications/wp/mid/documents/mid_wp16.pdf

The paper is a synthesis of the fi ndings of the seven case studies (Mauritius, Tanzania, Morocco, Swaziland, Sri Lanka, Malaysia and Namibia) presented in the volume The human factor in governance: managing public employees in Africa and Asia (2006) by the same author. McCourt presents the characteristics of HRM in the countries analysed. Strategic HRM in the form of mission statements was, for example, used in all of the countries studied, yet the day-to-day management continued as before. Other issues related to the strategic framework, strategic integration, line manager ownership and the institutional framework, as well as downsizing and employment reform, are also discussed in relation to the case studies. Three alternative approaches to employee selection are identifi ed. Common for the three approaches is the emphasis on increasing transparency, with inadequate attention given to quality concerns. In other words, the institutional dimension has been privileged at the expense of the professional dimension. The paper goes on to describe the relative success of performance management in the listed countries. Mauritius, Malaysia and Namibia have introduced performance-related pay schemes and have ended up duplicating many of the errors made by the countries serving as their models (in particular, the UK and New Zealand). McCourt uses all of these fi ndings to construct a two-step normative model of human resources management. The fi rst step focuses on integrity and a method of bureaucratic rule-following, while the second focuses on performance through strategic human resources management. The fi rst step focuses on legislation and downsizing, while step two implies aligning staffi ng with organizational objectives and introducing performance management. The model has implications for the sequencing of reform – for example, that integrity should be addressed before performance. In other words, a culture of rule-following has to be established before addressing the quality of staff management. However, the author emphasizes the importance of


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context and the need for ‘thick’ descriptions of political, economic, social and historical variables. Talking about staff management only in management terms is not suffi cient, since there is no such thing as politics-free public management. And vice versa: politics alone cannot successfully implement reform. A comprehensive approach must take into account the interaction between the micro level (HRM), the meso levels (policy and strategy), the macro level (institutions) and the meta level (politics).

McCourt, W. 2006b. “Employment and pay reform in developing and transition societies”. In: Y. Bangara, G.A. Larbi (Wds.), Public sector reform in developing countries. New York: UNRISD, Palgrave Macmillan.

The chapter’s focus is on individual fi nancial incentives in the wider context of fi scal reform. McCourt describes the various pay problems encountered by many developing countries, as well as the so-called transition societies. These consist principally of inadequate pay on all levels, opaque remuneration systems, unclear links between pay and responsibilities, unclear links between pay and performance, and insuffi cient pay to retain employees with scarce skills. The author provides several examples from the countries concerned and proposes a number of solutions to the listed pay problems. These are, respectively, across-the-board pay rises, the consolidation of remuneration, job evaluation (which gives a more justifi able basis for pay differentials), performance-related pay, and pay compression and pay differentials. McCourt goes through each of these separately and discusses what progress has been made and what challenges still remain in the area of employment and pay reform.

McCourt, W. 2006c. The human factor in governance: managing public employees in Africa and Asia. London: Palgrave Publications.

This book explores the ways in which governments manage public employees in developing countries and how this in turn has an impact on the success of national development and governance strategies. Drawing on governance, development and HRM literature, it presents seven in-depth case studies from developing countries in Africa and Asia (Mauritius, Tanzania, Morocco, Swaziland, Sri Lanka, Malaysia and Namibia). Finally, it proposes the way forward for


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human resources management in developing countries in the context of government reform strategies.

McLeod, R.H. 2005. Private sector lessons for public sector reform in Indonesia. Canberra: Australian National University. Retrieved 4 April 2008 from:http://rspas.anu.edu.au/economics/publish/papers/wp2006/wp-econ-2006-02.pdf

McLeod considers civil service reform crucial to improving Indonesia’s economic performance. The goal of such reform should be to create an environment of open and fair competition within public organizations. The development literature’s focus on ‘growth accounting’ does not ensure bureaucratic effi ciency; sound policies are not automatically implemented in a sound manner. The problem lies not with the lack of skills, but the lack of strong incentive to use these skills optimally. Current public organizations are characterized by a rigid organizational culture, little matching of skills and qualifi cations to the tasks to be carried out, no competition from the outside, and the imposition of seniority requirements. In short, the rules of the game are weak and the playing fi eld is far from level.

The solution lies in thinking about what makes organizations effective and drawing on successful examples from outside the public sector. Progress through emulation is one such strategy. Numerous examples from sports and the private sector illustrate the importance of competition in enhancing performance. Competition should therefore be more strongly emphasized in public human resources management strategies. Fair competition is basically about transparency. This can be done by opening up the competition for positions, setting clear rules governing that competition and making provision for the enforcement of those rules. In addition, one may establish detailed job descriptions, offer salaries similar to those in the private sector, and offer career and promotion prospects. In order for such a change to occur, a leader capable of creating competition in a traditionally competition-free environment is crucial.


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Mengesha, G.H.; Common, R. 2007. “Public sector capacity reform in Ethiopia: a tale of success in two ministries?” In: Public Administration and Development, 27, 367-380.

The article assesses the impact of public sector reform in two ministries in Ethiopia – the Ministry of Education and the Ministry of Trade and Industry. The putting in place of incentive schemes and monitoring systems is not considered part of this reform, but rather as an auxiliary to the reform process. They constitute a ‘partnering’ factor that may protect the reform from backsliding. The author describes the evolution of the Ethiopian civil service from a ‘bureaucratic dictatorship’ to the institutional reform in the 1990s. Human resources management became a key area for reform in the Civil Service Reform Program (CSRP) introduced in 1996. The most recent reform phase began in 2001 with the Public Sector Capacity Building Support Program, which is focused on the improvement of service delivery, citizen empowerment and the promotion of good governance and accountability. The CSRP was reformulated in 2003 in order to cohere with the other reform programmes. One of the CSRP’s main objectives is to build a civil service that is ethically sound and free of corruption, nepotism and favouritism. In order to achieve this goal, a change in bureaucratic values is needed. The two ministries assessed in this study may prove to be useful examples for future change, as the reform has been fairly successful and has resulted in substantially improved service delivery. Decisive factors are political commitment, well prepared groundwork and the implementation of an appropriate monitoring system. The issues of incentives and performance appraisal are not discussed in detail, although they are considered crucial in terms of sustainability and in order to enhance the momentum of reform.

Mengistu, B.; Vogel, E. 2006. “Bureaucratic neutrality among competing bureaucratic values in an ethnic federalism: the case of Ethiopia”. In: Public Administration Review, 66(2), 205-216.

Using the case of Ethiopia as a point of departure, the authors explore the challenge of preserving bureaucratic neutrality when the government is structured on the basis of ethnicity. Kaufman’s theory of competing bureaucratic values is applied to neutral competence and considerations of representation and executive leadership. The


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authors’ argument makes the assumption that public sector reform must be accompanied by changes in civil service systems in order to accommodate this reform. When this does not occur, the civil service becomes a key obstacle for capacity development. The success of civil service reform is debatable; one important lesson in this regard concerns the infl uence of bureaucratic values that were in place prior to reform. The main question posed by the authors has important implications for the role and functioning of incentives – that is, should civil servants be selected on the basis of competence or ethnic representation? The latter could be converted into a patrimonial instrument for political power, which has been the case in Ethiopia. Another factor to consider is whether the perceived legitimacy of a government is strong enough to conjure suffi cient capacity and will for reforming the civil service. Civil service reform is diffi cult to implement. The paper offers valuable insight into the additional challenges encountered by developing countries in post-confl ict situations, especially in countries like Ethiopia, where the issue of ethnicity has consequences for the design of incentives for civil servants.

Mentz, J.C.N. 1997. Personal and institutional factors in capacity building and institutional development. Maastricht: European Centre for Development Policy Management.

The central focus of this paper is an analysis of the concepts of capacity and capacity building and their role in public service management. The civil service plays a central role not only in economic development, but also in the development process as a whole. How does capacity building fi t into the process of civil service reform? Capacity building (or capacity development) does not take place in a vacuum but in a specifi c economic, social and political context. It is therefore necessary to paint in broad brush strokes some of the salient features of public service management in Africa and some of the problems it has encountered in recent decades. Capacity and capacity building have received considerable attention in the current public management literature and a review of the contributions by some of the more important authors in this fi eld will be done. An alternative framework based on personal and non-personal dimensions of capacity is then presented.


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Morgan, P.; Baser, H. 2007. Building the capacity for managing public service reform: the Tanzanian Experience (ECDPM Discussion Paper 570). Maastricht: European Centre for Development Policy Management.

This recent case study prepared for the project Capacity, change and performance describes and analyses how Tanzania managed to build its capacity in order to go through a comprehensive process of public sector reform. In fact, this process has been relatively successful compared to other African countries. The theoretical framework emphasizes the interaction between the core variables of performance, capabilities and endogenous change. The variables also interact with the external context and interventions, relevant stakeholders, and internal features and resources. In relation to incentives, it is the impact of the latter on capacity development that is of interest. Incentives are evoked as one important tool in order to build capacity and create bureaucratic acceptance of reform.

The paper gives a detailed introduction to the history of the Tanzanian public sector and the wider context of change. The general success of the reform process is linked to the nature of the Tanzanian governance structure, which appears to rely less on personalization and informal structures compared with most other African countries. Consequently, the incentive to rely on performance rather than clientelism is greater. In addition, the country’s public organizations clearly make the distinction between its political and bureaucratic spheres. Appointments to public organizations are increasingly being made through public notice and competitive selection. According to the authors, the reform process gave staff a sense of meaning, which proved to be more important in fostering motivation and responsibility than fi nancial incentives. This is interesting because it goes against the conventional wisdom of fi nancial incentives as key to increased capacity and performance. However, important challenges remain: the country cannot afford to pay a living wage to many public offi cials. As a result, corruption is a widespread problem. Given the country’s socialist background, a diffi cult issue for the government has been that of pay reform and the awarding of bonuses to key staff. Pay levels remain compressed and many of the key staff, whose contributions are critical to improved performance, remain severely underpaid.


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The case study is useful because it addresses both the structural and social aspects of the context and the process of public sector reform. The authors privilege the role of internal stakeholders such as politicians and senior government offi cials, and address important issues linked to incentives throughout the paper, albeit as one of several tools for managing reform.

Mukherjee, R.; Manning, N. 2000. Rewards and incentives. Washington, DC: The World Bank Group. Retrieved 10 April 2008 from:www1.worldbank.org/publicsector/civilservice/agency.htm

The brief outlines some key issues for consideration in relation to civil service pay and incentives for performance. The determination and structure of civil service pay is described, and distinctions are made between monetary, in-kind (for example, health insurance) and intangible incentives. Incentives are further divided into base rewards, allowances and future expectations, such as pensions. A number of examples are used to illustrate the relative proportions of the different types of incentives. In Jordan, for example, allowances amount to 70 per cent or more of the basic salary. The brief goes on to discuss a number of issues, such as the problem of wage compression; in general, civil service pay is too ‘compressed’ to provide incentives for career advancement within the civil service. Linking a civil servant’s pay to individual performance is an effective tool for improving performance, but is uncommon in developing countries.

Mukherjee, R.; Manning, N . 2002. Salary top-ups. Paper prepared for the World Bank’s Governance and Public Sector Reform team. Retrieved 16 July 2009 from:http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPUBLICSECTORANDGOVERNANCE/EXTADMINISTRATIVEANDCIVILSERVICEREFORM/0,,contentMDK:20134070~menuPK:1919795~pagePK:210058~ piPK:210062~theSitePK:286367,00.html

This short brief gives an introduction to the practice of salary top-ups and how they distort incentives and can potentially contribute to a public sector brain drain. The paper draws on various examples to illustrate the problem. Three types of top-ups are identifi ed: position-based, task-based and donor-funded allowances. The fi rst two


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compensate to some extent for the compression of wage levels existing in many developing countries. The third kind, although offi cially frowned upon, is given in order to attract the best staff available to development projects managed by donors. The practice distorts the local labour market and further erodes public sector capacity. Increased transparency and regulation regarding top-ups may improve the situation.

OECD Observer. 2005. Paying for performance: policies for government employees (Policy Brief, May). Paris: OECD Observer. Retrieved 16 July 2009 from:www.oecd.org/dataoecd/13/51/34910926.pdf

This short brief explores the concept of PRP (performance-related pay), the idea behind it and the widespread yet varying nature of PRP implementation in OECD countries. PRP has become a major tool for modernizing the civil service in OECD countries over the past few years. The idea behind it is that PRP will have a motivating effect on individuals, allow the public sector to compete with the private sector for human resources and contain salary costs by reducing the automatic progression of pay levels. PRP can be given as merit increments or as bonuses. Over the past few years, the latter has increasingly been used at the expense of the former.

The brief evokes the diffi culties often encountered as well as the potential benefi ts of replacing the traditional civil service system with performance-related pay. When it is applied properly in the right managerial context, it can indeed be a useful tool for motivating staff. However, PRP has often proved to be less effi cient than expected. Job content and career development remain more important incentives for most public employees. This is also linked to the diffi culties in measuring and assessing performance. PRP can have effects contrary to its intentions if transparency, trust and clear promotion mechanisms are not already in place. However, the introduction of PRP may have derived effects leading to organizational and managerial change. Thus, PRP may be considered not only an individual-level incentive, but can also function as an organizational incentive, introducing a goal-setting approach that might enhance the effi ciency of the organization as a whole. Although the brief looks primarily at OECD countries, the


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general lessons that are drawn in the conclusion are of universal character. The economic diffi culties, budgetary constraints and private sector competition that led OECD countries to seek civil service reform in the fi rst place are today important concerns shared by many non-OECD countries.

Olowu, B. 1999. “Redesigning African civil service reforms”. In: The Journal of Modern African Studies, 37(1), 1-23.

The author asserts that the failure of past civil service reforms (CSR) is linked to their content and strategy, and not to their poor implementation, as previously assumed by numerous scholars. These failed strategies have been much too focused on technical issues of reducing the size and cost of the civil service, with less attention being given to developing institutional capacity. An effective civil service is a necessary condition for an effective state and economic growth in that it plays an important role in society and the economy as an institution of employment, governance and policy-making. However, due to faulty diagnosis and prognosis, civil service capacity has eroded. According to Olowu, African civil services were not as overstaffed as previously assumed. In some cases, such as in professional and managerial areas, they were even severely understaffed. The inability to attract and retain high quality professionals has been, and still is, the major problem in African civil services. Past CSR strategies (in the 1990s) focusing on organizational restructuring, personnel management (retrenchment and pay reform, leading to wage erosion and compression), and budgetary and fi nancial reforms have proved to be costly and counterproductive. There has been a decline in compensation for professional skills, the merit system has broken down, accountability systems are weak, and bureaucracies have a tendency of becoming politicized and centralized. In addition, CSR has been introduced without consulting key stakeholders, with an extensive focus on short-term results (because of donor demands), and disconnected from other types of political or economic reform. Donors are now realizing that a different set of strategies should be employed. Capacity building (training of human resources) is but one of the many recent reform elements that put the issue of good human resources management at the centre of civil service reform. Such reform should include the restoration of meritocracy (focusing on the high-skilled levels), improving


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accountability and competitiveness, decentralization, the mobilization of additional resources, and improving the information base of African civil services.

Polidano, C. 2001. Why civil service reforms fail (Public Policy and Management Working Paper No. 16), Manchester: Institute for Development Policy and Management, University of Manchester.

The paper focuses on the design and implementation of civil service reform in order to explain why such reform has a record of being relatively unsuccessful. According to the author, this is not due to the actual content of reform proposals, but rather to the diffi culty of getting past the implementation stage. The author thus underscores the importance of tactical issues when analysing failed reform. Three main issues are considered: the scope of reform, the role of aid donors and the leadership of reform. For each issue, the author presents the principal authors on the subjects and their points of view. The author also considers the issues of institutional pressures and incentives, which can lead to reform failing. Concerning the scope of reform, low administrative capacity, for example, is not only linked to structure, but to social norms and institutionalized behavioural patterns. In addition to simply changing incentive schemes, a comprehensive institutional reform may be necessary in countries with a high degree of patrimonialism. On the other hand, incentives and performance measures are so complex that it may be more advisable to introduce changes as small-scale experiments. Lack of ownership due to an excessive donor infl uence and a lack of leadership are other potential obstacles for reform.

Rahman, A.T.R. 2001. Reforming the civil service for government performance: a partnership perspective. Dhaka, Bangladesh: University Press Limited.

Rahman makes the distinction between administrative, civil service and governance reform. Each chapter addresses these three types of reform with empirical illustrations from different countries. The issues of retrenchment, the political neutrality of civil servants, performance measures and training are discussed. Malaysia, Argentina, Poland and Uganda are a few of the countries analysed. In Uganda, for


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example, indigenous performance and results-oriented processes have been introduced to create specifi c goals for government agencies.

Rugumyamheto, J.A. 2004. “Innovative approaches to reforming public services in Tanzania”. In: Public Administration and Development, 24, 437-446.

The author gives a detailed description of Tanzania’s public reform efforts and the different phases within this long-term process. The civil service reform phase from 1991 to 1999 managed to introduce and fully integrate a human resources management and payroll system, contained growth of the civil service and enhanced salary levels. However, the reform process as a whole was only partly successful and the reformulated Public Service Reform Programme was adopted. Improving the staff incentives framework under severe budgetary constraints is one of the key issues in the programme. It goes beyond structural changes and emphasizes the need for a cultural re-orientation of public servants and the general public in order to improve performance and service delivery. Stronger demands and better supply go hand in hand: as incentives for civil servants create a momentum for increased performance, the public’s expectations are raised and the external demands for accountability and effi ciency are strengthened.

According to the author, Tanzania’s reform strategy is particularly promising because it contains various innovations designed to fi t the specifi c national context. Pay reform is one example of a politically sensitive issue that has been handled in an innovative manner through the SASE (Selected Accelerated Salary Enhancement). The SASE has replaced previous top-ups that were offered to key civil servants in an inconsistent manner with little transparency. SASE is a top-up given to civil servants in charge of reform implementation. It is equal to the difference between current pay and the medium-term policy targets, which aim to gradually increase competitive pay levels. As current pay gradually increases in order to meet this goal, the SASE sum will gradually decrease. A performance appraisal system has been introduced in order to evaluate the recipients of these top-ups. However, there are important political obstacles to the mainstreaming and full integration of this initiative: limited resources and the legacy of egalitarianism may contribute to making the SASE a short-lived pilot project. In a


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concluding remark, the author emphasized the importance of political leadership and commitment for successful reform.

Saasa, O.S. 2007. Enhancing institutional and human capacity for improved public sector performance. Background paper prepared for the 7th Africa Governance Forum, Building the Capable State in Africa, in Ouagadougou, Burkina Faso, 24-26 October.

The fi rst part of this paper attempts to defi ne the meaning, scope and main elements of capacity building at the institutional and human resources level. Capacity development is in this context understood as improving organizational effectiveness, and includes governance, management capacity, human resources, fi nancial resources and service delivery. The issue of human resources capacity development is crucial in order to improve institutional capacity. A large public sector with low salaries and few skilled professionals has led to capacity erosion, which has been aggravated further by excessive centralization, ethical irresponsibility and even corruption.

The second part of the paper presents the main challenges to effective capacity development at the described levels. Three interventions are central; they correspond to and aim for improved performance in public bureaucracy, the process of change in the context of globalization, and effi cient service delivery through decentralization. Concerning the fi rst type of intervention, instruments for incentives and rewards for civil servants through proactive personnel management and strong leadership development are crucial. One important challenge is the gradual erosion of the concept of merit within the civil service. The achievement of results should become the dominant ethic of the public sector.

The last part of the paper presents some capacity development initiatives and recommends a number of actions related to leadership challenges, good governance and overall public sector reform.

Schneider, B.R.; Heredia, B. (Eds). 2003. Reinventing Leviathan: the politics of administrative reform in developing countries. Miami: North-South Center Press, University of Miami.

The volume addresses the issue of state reform in emerging economies. A number of scholars and policymakers have contributed


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to the volume. The reform processes in six countries (Argentina, Brazil, Chile, Hungary, Mexico and Thailand) are described and assessed. A comprehensive analytical framework for analysing public sector reform processes is elaborated. The volume presents the initial efforts of ‘rightsizing’ the state, but focuses on the so-called ‘second generation’ administration reforms aiming for capacity development. Three conceptually distinct (yet often overlapping in real life) models of reform are presented: civil service (Weberian) reform, managerial reform and accountability reform. The authors identify the determining factors for successful reform, such as the relationship between the political and the bureaucratic sphere. If this relationship is close, the incentive for reform will generally be low, as is the case in Mexico and Thailand. Another deciding factor is the commitment of the bureaucracy, which often proves diffi cult to foster. Reformers must therefore fi nd the balance between a top-down (an insulated political process) and a bottom-up reform process, which allows for some consultation. Once initiated, the challenges of implementing and sustaining reform must be met. Civil serve reform is the model which seems the most diffi cult to implement, because moving towards merit-based appointments and incentives for performance deprives the elite of important instruments of power and infl uence over human resources management.

Sida. 2006. Power analysis – experiences and challenges (Concept Note, June). Stockholm: Sida. Retrieved 16 July 2009 from:www.sida.se/English/About-us/Sidas-Publications/

This paper is a result of Sida’s participation in the OECD/DAC Task Team on Power and Drivers of Change, and is a useful introduction to the concept of power analysis. The paper presents a framework for analysing interests and power confi gurations in developing countries, namely power analysis. Power analysis may, for example, reveal why resources and authority are not transferred to lower levels of government in spite of decentralization reforms. Power analysis may also be useful in identifying windows of opportunity for change and potential change agents. A power analysis and similar types of analytical assessments are much used by donor agencies in order to achieve a better understanding of the political and institutional factors that shape development outcomes. More specifi cally, a power analysis can contribute to stimulating thinking about what can be done in order


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to reach policy goals in terms of formal and informal power relations, structures and the actors or incentives involved. Key issues deal with articulation and voice – that is, the capacity of civil society to impose demands upon the state, and responsiveness, or public mechanisms capable of acting upon these demands. This involves an analysis of the institutions and structures that shape capacity and the incentives for actors within the public sector. Finally, institutionalized and sustainable accountability mechanisms should be a key characteristic of the interaction between states and civil society. The paper presents a number of lessons learned when conducting a power analysis, in terms of process, method and content.

Therkildsen, O. 2001. Effi ciency, accountability and implementation: public sector reform in east and southern Africa (Programme Paper (Democracy, Governance, and Human Rights) No. 3. Geneva: UNRISD. Retrieved 16 July 2009 from:www.unrisd.org/80256B3C005BCCF9/httpNetITFramePDF?ReadForm&parentunid=37B5E941053B5E8B80256B5E004B5907&parentdoctype=paper&netitpath=80256B3C005BCCF9/(httpAuxPages)/37B5E941053B5E8B80256B5E004B5907/$fi le/therkild.pdf

The study includes examples from Kenya, Malawi, Mozambique, South Africa, Tanzania, Uganda, Zambia and Zimbabwe. The author looks at the characteristics, the (mixed) results of civil service reform in these countries, and their implications for the issues of effi ciency, accountability and implementation. Stronger incentives for performance, performance-based management and empowering users constitute important tools in this respect. According to the author, however, there is generally less emphasis on incentives aimed at accountability than on those aimed at effi ciency. The paper presents competing theoretical approaches for understanding the erosion of public sector capacity and how it should be dealt with, followed by a presentation of the World Bank’s position on the matter. The often-used NPM-inspired measures are described, and the notion of accountability and the diffi culties of ensuring it are discussed widely. Effi ciency measures are generally linked to a reduction in and refocusing of public sector activities. Finally, going beyond the content of reform, the author focuses on issues related to the actual implementation process of reform.


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In the second part of the paper, the author presents and analyses the case studies (the listed countries) according to the issues already elaborated theoretically. The paper thus gives a detailed empirical description and theoretical analysis of key issues linked to public sector reform. In relation to incentives, the discussions on pay reform and accountability are particularly relevant. Uganda is a case in point. The author describes how real wage levels have been increased substantially (although from very low levels) by reducing the number of public employees. The pay policy aims to pay living wages to civil servants and to monetize benefi ts such as housing and transport. However, concerns about fi scal stability and reduction in public expenditure are generally privileged over pay reform. When it comes to accountability, performance-based management (top-down) and citizen empowerment (bottom-up) are principal approaches. The former has been introduced in one form or another in most of the country studies. However, progress seems to be slow, as is the case with Results Oriented Management (ROM) in Uganda. Empowerment has been introduced through citizens’ charters in South Africa and Zimbabwe. Public complaints mechanisms and user charges are also much-used tools. The actual accountability outcomes, however, are uncertain and under-researched.

Ul Haque, Nadeem. 1999. “Incentives and human resource management in the design of public sector reform”. In: The Pakistan Development Review, 38(4), 471-488.

The author begins the article by criticizing past Western development approaches. He describes the consequences of the evolution of these approaches, from the emergence of the omnipotent developmental state to the reduction and fragmentation of the public sector, wage freezes and wage cuts. The present ‘governance’ approach to development is promising because it places the public sector at the centre of development. Consequently, the place of civil service reform is changing from a non-issue to a simple budgetary concern, to becoming a key issue in public sector reform.

Ul Haque makes reference to the principal-agent and asymmetrical information paradigms, and incentives and organizations theory, and lists a number of concepts and arguments that illustrate the importance


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of incentives if a public organization is to become both effi cient and accountable. Public organizations are in need of professionalization and decentralization. A professional meritocracy can help tie the individual’s interests to that of the organization, as is the case in the private sector. The author further assesses the poor state of human resources management in developing countries and discusses widely the donor-supported technical assistance programmes and expatriate advisors that try to compensate for the brain drain in developing countries. More research should be done on the costs and benefi ts of the alternative channels of brain drain repatriation and technical assistance for development.

Finally, the author draws on lessons from incentive schemes in the private sector to make recommendations related to the reform of the Pakistan civil service. However, in most developing countries, policy analysis and formulation is made by international agencies by default. In his concluding remarks, Ul Haque therefore underscores the importance of adapting reform policies to the specifi c contexts in question and thus, the imperative of retaining domestic human capital.

Ul Haque, Nadeem. 2006. Why civil service reforms do not work. Islamabad: Pakistan Institute of Development Economics. PIDE Working Paper 24. Retrieved 4 April 2008 from:www.pide.org.pk/pdf/Working%20Paper/Working%20Paper-24.pdf

Ul Haque recalls the evolution of development discourse in order to situate civil service reform (CSR) within the governance paradigm. CSR is an important explanatory variable for an economy’s performance. The author goes on to describe the failure of past CSR efforts, as supported and evaluated by the World Bank. By using the available data, the author illustrates how public wages have declined in developing countries over time and that this decline has been the most severe in the poorest countries. Wages have been compressed in the public sector, while the share of the labour force employed in the public sector has increased slightly. The author describes the hierarchical structure of public sector organizations and the lack of incentives present.


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The paper argues that the failure of previous efforts in CSR is linked to a lack of knowledge about the theory of incentives in organizations. He draws on the agency analysis literature and describes six useful fi ndings concerning how, when and why incentives matter: incentive compatibility, multi-tasking, teamwork, extrinsic incentives, convex wage structures and common agency. The author applies these insights to the public sector in developing countries and draws a number of lessons from this. Given the heterogenic nature of the public sector, change agents should not necessarily strive for a broad uniform reform process. Perks should be eliminated because they are not related to job performance. The public sector should be public service-oriented (be effi cient and worthy of respect) in order to attract talent. Training and skills improvement should be invested in. Clear missions and autonomous agencies perform better. Decentralizing allows a maximum interface between the benefi ciaries of public services and their providers. Professionalism and leadership are two additional ideas that have not had much of an impact on human resources management in relation to incentives. Concerning professionalism, one lesson drawn by the World Bank is that the extensive use of external consultants in policy-making leaves little room for professionals to take pride in their work. Leadership is equally important in order to provide the reform process with drive, vision and knowledge.

Past interest in CSR was linked to budgetary constraints rather than to incentives. Reform must be people-centred if it is to succeed and for change to occur, incentives need to be taken into account. This is especially important in developing countries. The author emphasizes the importance of going beyond economic theory and draws on disciplines like sociology and management.

UNCDF. 2005. Delivering the goods: building local government capacity to achieve the MDGs – a practitioners’ guide. New York: UNCDF.

This practitioners’ guide offers a very detailed account of how local governments can develop their capacity in order to reach the MDGs. The paper includes examples from Uganda, Nepal and Bangladesh. The guide is particularly useful as it presents a framework aimed to address the specifi c capacity challenges encountered on a


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decentralized level, especially in rural and diffi cult areas, where good practices are far apart. The fi rst chapter presents the logic of the Local Development Programme Strategy approach. Chapter 2 looks into local government funding and fi nancing strategies. It introduces the notion of performance-based funding to local governments, which is considered a promising innovation. Fiscal transfers are used as a fi nancial incentive in order to improve performance and to increase the demand for capacity-building support. In Uganda, UNCDF has worked closely with the Ministry of Local Government in order to design grant modalities with inbuilt performance incentives. The public was informed of the performance assessments and the grants awarded, and thus increased the external demand for accountability. Bangladesh and Mali have introduced similar schemes. The role of performance incentives has been taken one step further in Uganda, where they have been applied to achieve gender mainstreaming. Chapter 3 deals with local public expenditure management in a relatively detailed manner. Chapter 4 explores issues of accountability, communications and information. The focus is on external, downward accountability and user empowerment. The importance of establishing incentives for making information available to the public is emphasized. In both Nepal and Tanzania, the quality of communication activities constitutes a criterion used for assessing performance. It also considers ‘horizontal’ (between units on the local level) and ‘upward’ (to government) accountability. In Uganda, local governments have recently signed the Ugandan Charter of Accountability and Ethical Code of Conduct. This is seen as a mechanism for ensuring accountability and improved performance, but also for preventing recentralization. The fi nal chapter, entitled ‘capacity building’, outlines the preceding chapters. A framework for analysing local government capacity that addresses the numerous challenges already highlighted is presented.

UNDP. No date. Practice note on public administration reform. New York: UNDP. Retrieved 16 July 2009 from:www.undp.org/governance/docs/PARPN_English.pdf

This UNDP practice note takes a closer look at the content of administrative reform, a core area for UNDP support, and its role in poverty reduction and in reaching the MDGs. The note gives a detailed description of what is meant by public administration, and why and how


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it plays a key role in development issues. This is linked to the concrete action of the UNDP, and some principal issues and areas for support are presented: civil service reform, improving the policy-making system and restructuring the machinery of government. A number of lessons are given, aimed at creating a government workforce of the right size and skills composition, with the right motivation, professional ethos, client focus and accountability. These include a clear mission and a shared vision, training opportunities for all staff at the central and local levels of administration, establishment control (who is employed by the public sector, to perform which tasks and how much are they being paid), merit-based employment, establishing civil service management arrangement, improving pay and compensation regimes, gender equity and affi rmative action, performance management, and depoliticization of the civil service. The issue of donor top-ups is given considerable attention, as this is a widespread phenomenon with distortionary effects. Examples from Singapore, Slovenia, Vietnam, Cambodia, Belarus and Azerbaijan illustrate the different issues. The second part of the paper gives some practical advice when it comes to public administration programming from the UNDP perspective. Issues related to the sequencing of reform, fostering leadership, strengthening human rights capacities in the civil service, and accountability concerns are also addressed. Public expenditure tracking systems are cited as a useful tool for strengthening external accountability.

UNDP. 2003. Civil service training in the context of public administration reform. A comparative study of selected countries from Central and Eastern Europe, and the former Soviet Union (1989-2003). New York: UNDP. Retrieved 16 July 2009 from:http://unpan1.un.org/intradoc/groups/public/documents/UNTC/UNPAN013648.pdf

The study reviews approaches to civil service training in support of administrative reform. Such training is considered key to the process of public sector change. The case studies include Lithuania, Latvia, Armenia, Albania, Hungary and Slovenia. The authors argue that the creation of a new professional ethic cannot be achieved solely through the passing of civil service laws. Changing people’s attitudes and behaviour is of paramount importance. This emphasis on human resources implies an investment in training to enhance the value and


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prestige of civil servants, to improve performance, and to match improvement in professional integrity and ethical standards with commensurate rewards. Most countries have taken steps in order to unify the framework for job pay, grading, promotion and appraisal. The study makes distinctions between a position-based and a career-based civil service system, between pre-service and in-service training systems, and between supplier-funded and buyer-funded arrangements for state-funded training. The case studies are analysed according to these variables. In addition, a descriptive account of the broader administrative reform process is given for each country. The fi ndings imply that there is not one ‘best’ approach to training, but some common factors may be identifi ed. These include overall strategic guidance, regulation and the existence of a national training institution combined with a network of training suppliers. The overall objective of a professional career-based civil service and the establishment of human resources management structures is considered a crucial factor in shaping civil service training systems and making them effective.

UNDP. 2006a. Incentive systems: incentives, motivation, and development performance – a UNDP capacity development resource (Conference Paper No. 8, working draft, November). New York: Capacity Development Group, Bureau for Development Policy, UNDP.

This working draft links incentives to motivation and explores the analytical linkages and implications between the two, as well as improved public sector performance. Incentives that have a motivational effect can lead to improved performance, which in turn leads to capacity development. The UNDP considers motivation an essential aspect of capacity development, although it is often downplayed in comparison with the importance of acquiring new knowledge and capacity at the individual level. The paper therefore tries to identify how we can qualify something as having a motivational effect – that is, identify what measures constitute incentives, and how we can conceive of incentives in relation to capacity development. According to the authors, motivation is multi-layered and multi-dimensional: they make the distinction between tangible and intangible incentives, positive and negative incentives, individual and organizational incentives, and internal versus external incentives. The nature of incentives varies


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according to their target group and level of analysis. The differences between incentives for individual, organizational and societal motivations are explored and relevant examples are given.

The following section explores how incentives can be used in order to stimulate better performance in the public sector, retain and attract talent on the global labour market, encourage local service delivery in remote areas, encourage people to claim their rights, and align aid for capacity development. Finally, the authors offer three alternative incentive strategies used to mobilise capacity and promote development performance: (1) reducing distortionary incentives by aligning aid around national pay reform, (2) reducing de-motivation and valuing non-material incentives for public sector performance, and (3) conditional cash transfers to strengthen demand. Non-material incentives need to be recognized, valued and reinforced. Their impact might be stronger than fi nancial incentives in some cases and they constitute alternative strategies in countries where it is fi nancially diffi cult to raise salary levels. Strategies such as private-public partnerships or aligning aid between government and donor agencies may also provide incentives for improved service delivery and public sector performance.

UNDP. 2006b. Institutional reform and change management: managing change in public sector organizations – a UNDP capacity development resource (Conference Paper No. 5, working draft, November). New York: UNDP.

As the title implies, this working draft explores the concept of change management within the context of public sector reform. It refers to both external and internal change, the latter being most closely related to planned reform imposed on an organization. A typology of change interventions is presented: top-down, transformational and strategic. The challenge is to match the models to a concrete context. However, within the development context, there is little knowledge of change management and the related issues of constraints embedded in bureaucratic systems. The example of the complexity of the Afghan salary scales is a case in point. Such change processes need to be mapped out step by step (that is, be managed) and be consulted on in order to reach consensus around a given reform. Nevertheless, such


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reform often fails. Exploring the changing roles and basis of power during reform provides answers as to why so may change projects fail.

The authors also look at different tools for managing change in two decisive phases: (1) managing the environment of change (creating a momentum for change and assessing the change context), and (2) executing the change process (facilitating change and communicating about change). The tools described include advocacy activities, visioning, empowerment and voice, stakeholder analysis, consultation, leadership, brainstorming, and measuring and celebrating progress. Finally, embedding change messages in social and organizational culture is one of UNDP’s guiding principles, since organizational culture (in which employees often lack the incentives of innovating) is often a decisive determinant in the direction and pace of change.

UN Department of Economic and Social Affairs. 2005. Unlocking the human potential for public sector performance (World Public Sector Report). New York: UN.

The volume summarizes the contemporary approaches to unlocking human potential within organizations. It presents three chronological yet overlapping models for public sector reform: traditional public administration, public management (including NPM) and the most recent approach, responsive governance. Where the traditional approach is generally rule-based and is accountable to politicians, public management is inspired by private sector management and accountability to ‘clients’. The third model, responsive governance, emphasizes accountability to citizens and stakeholders, and values empowerment, transparency and participation. By combining elements from each model, a new theoretical framework for public human resources management, based on the corresponding values of impartiality, professionalism and responsiveness, is presented. The next chapter underscores the link between a merit-based bureaucracy and economic growth and poverty reduction, via human resources. The goal of human resources management is therefore to align public staff behaviour with the public interest. The principal tools for achieving this are through the building and development of capacity, motivation,


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integrity and leadership. Since public reform has proven to be path dependent, the importance of context, culture and the history of a country’s public administration has to be taken into account when designing an HRM strategy. Global challenges such as demographic shifts, labour migration and HIV and AIDS also have to be considered in this respect. Chapter 4 reviews some empirical evidence of recent public sector reform efforts, such as performance-related pay. The reasons for the limited success of such efforts are discussed and warn against the blind application of NPM tools in developing countries. Options available to policymakers, such as merit-based appointments and decentralization, are presented. The use of these options should correspond to the specifi c needs and priorities of organizations. Key advice is presented, such as the need for professionalizing HRM, introducing merit appointments and improving pay, while paying attention to equity issues. Performance management and quality leadership are additional tools for improved performance. Finally, the issue of organizational culture is addressed, in addition to ways of encouraging and promoting organizational learning, such as by strengthening the career development system.

Van Lerberghe, W.; Conceição, C.; Van Damme, W.; Ferrinho, P. 2002. “When staff are underpaid: dealing with the individual coping strategies of health personnel”. In: Bulletin of the World Health Organization, 80(7). Retrieved 13 April 2008 from:www.who.int/docstore/bulletin/pdf/2002/bul-7-E-2002/80(7)581-584.pdf

The paper explores the nature and impact of so-called ‘coping strategies’ that health personnel develop when they are severely underpaid. Such coping strategies may have predatory effects and further undermine the performance of the health sector, such as under-the-counter fees. In other words, health professionals’ way of dealing with unsatisfactory living and working conditions actively contribute to capacity erosion. Such unethical behaviour has long been a politically sensitive issue. More attention should be given to the issue in order to better understand the phenomenon and elaborate effi cient strategies to deal with the consequences of such behaviour. Coping strategies create competition for time (many health professionals share their time between the public and the private sector), a resulting confl ict


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of interest and contribute to the brain drain (both inter-country and rural-to-urban migration). Closing the salary gap will not be suffi cient in order to change the fact that leaving the public sector has become a sign of success. The problem should also be dealt with openly through discussion. Incentives that are coherent with the organization’s goals should be introduced, providing health staff with fi nancial compensation, a clear sense of purpose and the necessary recognition. Ultimately, such incentives should target health professionals’ value systems. Pressure not only from the government and donors, but from peers and users, may prove an effi cient way of ensuring ethical behaviour in the health sector.

Verheijen, A.J.G. 2000. Administrative capacity development: a race against time? (Working document W 107). The Hague: Netherlands Scientifi c Council for Government Policy.

The paper explores the crucial issues of administrative capacity development in Eastern and central European countries in the context of EU membership (the incentive of membership). The author evokes the administrative requirements for EU membership. The European Commission has in the past tended to focus on sectoral technical capacities, but the current debate focuses on so-called horizontal administrative capacities – that is, a professional civil service, a well developed accountability system, clear administrative structure and adequate management functions. The paper identifi es a number of defi ciencies in the public administration of these countries and explores different ways of handling these. The gap between the offi cial statements for reform and actual progress has been considerable. Common defi ciencies were fragmented, politicized administrations, corruption, underpaid staff and a high degree of staff turnover. In addition, there were high levels of citizen distrust in the administrations. Legislation (civil service laws), training and structure have been identifi ed as important contributors to change. Legislation can establish transparent systems of employment conditions for civil servants. Training is considered an effi cient reform tool as it creates a more coherent civil service, changes mentalities and may create a sense of community among civil servants (and thus limit fragmentation). Clear coordination and accountability systems are equally important. Improving policy processes and internal and external fi nancial control have been emphasized by the


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EU. Ombudsman institutions and citizens’ charters are good examples of external accountability and voice mechanisms, although they have proved diffi cult to introduce because of the legalistic culture in these countries. The value of legislation has generally been overestimated, while changing administrative culture has been underestimated (“laws do not change mentalities”, p. 42). While economic and external political pressure have pushed for reform, persistent leadership and the use of a well-balanced set of reform instruments have not been present or been able to give momentum to the reform process. Developing innovative incentive schemes has proved to be diffi cult, since it goes against the egalitarian mentalities present in many Eastern and central European countries.

Wescott, C. 1999. “Guiding principles on civil service reform in Africa: an empirical review”. In: The International Journal of Public Sector Management, 12(2), 145.

The article reviews civil service reform (CSR) in Africa, as described and analysed in the Guiding Principles on Civil Service Reform. These principles were endorsed in 1995 by the Special Program of Assistance for Africa (SPA) as a tool for better donor coordination and support to CSR. The conclusions made by the SPA were based on previous research, donor experiences and in-depth case studies of selected countries.

The ultimate goal of CSR is to contribute to economic and social development by enhancing the civil service’s capacity to perform effectively. Personnel management is considered a core element of the type of comprehensive reform recommended by the SPA. However, there is no consensus as to whether such broad-based reform should generally be ‘top-down’ or ‘bottom-up’. Scholars and practitioners agree that both strategies will take time to implement fully – from 10 to 20 years in most countries. Reform should be participative, coherent with overall public expenditure plans, and supported by the political and administrative leadership. Reform should not be imposed from the outside; ownership of the reform process is vital and the role of donors should therefore be limited to one of facilitation (technical assistance) and consultation. CSR should aim at establishing a professional civil service with a stronger emphasis on performance. Patrimonial and


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centralized structures, practices of authoritative leadership, and ethnic loyalties should be eradicated and replaced by ethical standards and accountability. However, the author warns against the unconditional transfer of Western concepts and approaches to the African context. The Weberian bureaucratic model has had a perverse effect on incentives in Africa, leading to rent seeking and other unintended outcomes, such as ghost workers. Introducing performance management in African civil services should reform pay and benefi t structures by restoring differentials, introducing performance-related aspects and monetizing benefi ts. Performance management also depends on capacity building (training of human resources) and organizational aspects, such as leadership and behavioural norms. CSR policies should be monitored and evaluated continuously, and supported by aid mechanisms in order to succeed.

World Bank. 2005. Tajikistan – civil and public sector service wage note. Washington DC: World Bank Poverty Reduction and Economic Management Unit, Europe and Central Asia Region. Retrieved 13 April 2008 from:www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2006/03/03/000112742_20060303100758/Rendered/PDF/32622.pdf

The study assesses the public service reform process in Tajikistan, with a particular focus on capacity development through wage system reform. The wage system is characterized as opaque and highly compressed, with extremely low wage levels. Various allowances and supplements add to this complexity. Institutional capacity development is considered crucial in order to sustain the country’s growth levels. The brain drain is a major challenge. After giving a detailed description of the country’s political and economic context, the study assesses the reform agenda and the macroeconomic and fi scal context. Special attention is given to the reform of civil service wages and the sequencing of reform. While comprehensive reform is recommended, the country’s low capacity makes it necessary to take a step-by-step approach to reform. Building a system that will attract staff and provide incentives for enhanced performance in a context of limited human, administrative and fi nancial capacity is a major challenge. The fi t between wage reform and the overall public reform process is an additional challenge


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that needs to be addressed. The paper puts forward a number of steps that should be taken in order to improve the situation. These include the integration of bonuses and allowances into a new base pay ration, change the calculation of the qualifi cation rank payment, introduce a decompression policy, and establish an incentives fund that may be used to pay a supplement to staff in positions that are in high demand. Some of these have already been introduced in pilot institutions. The study is relatively recent and addresses in a detailed manner the many challenges linked to the improvement of fi nancial incentives for the civil service. In this respect, the recommendations put forward in the case study may be useful for other countries in similar situations.

World Bank. 2008a. Public sector reform: what works and why? An IEG Evaluation of World Bank Support (Advance Copy). Washington DC: World Bank.

This World Bank evaluation presents the rationale for public sector reform. IEG has examined lending and other kinds of Bank support from 1999-2006 for public sector reform in four areas: public fi nancial management, administrative and civil service, revenue administration, and anticorruption and transparency. The main objective of this IEG evaluation is to help the World Bank learn how to contribute more effectively to public sector reform in its member countries. Sound fi nancial management, an effi cient civil service and administrative policy, the effi cient and fair collection of taxes, and transparent operations that are relatively free of corruption, all contribute to good delivery of public services, and are described and analysed extensively in this report. One of the main fi ndings is that performance usually improves for public fi nancial management, tax administration and transparency through reform, but that this is usually not the case when it comes to the civil service. The civil service and the administrative dimensions of public sector reform therefore need to be devoted more attention.

World Bank. 2008b. Using training to build capacity for development – an evaluation of the World Bank’s project-based and WBI training. Washington, DC: World Bank.

This World Bank evaluation considers the use of training as a capacity development modality. Training is a widely used tool when


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it comes to helping countries build their institutional capacity to achieve development objectives. The World Bank alone fi nances about US$720 million worth of training every year. Many training exercises help trainees acquire new skills and knowledge, but do not translate into improved performance in the workplace. For training to contribute to individual learning, and in turn lead to better workplace outcomes and stronger organizational capacity, the content of training has to be targeted carefully to the organization’s needs. Employees need resources and incentive to apply their learning in the workplace. Various issues linked to training design, training results, monitoring and evaluation are discussed extensively in relation to the wide objective of capacity development.

World Bank Institute. 2007. Tools for development – public sector governance reform (Capacity Enhancement Brief, May, No. 7). Washington, DC: World Bank Institute.

The brief introduces the topic of public sector governance reform by linking incentives to accountability. Incentives can improve internal and external accountability, and consequently, contribute to good governance. The World Bank Institute introduces in this brief the Public Sector Governance Reform Cycle – a framework or inventory of tools that can be useful for assessing the capacity gaps in the public sector, and elaborating proper incentives to fi ll the gaps and strengthen public sector capacity and accountability. The framework is based on World Bank research and can help users identify the different tools that have been elaborated, understand governance problems and develop proper strategies to address them.

The cycle consists of fi ve phases of reform. For each cycle, examples are provided of relevant tools that are in use or under development. The cycle moves from (a) identifying relative strengths and weaknesses in governance at the country level and create awareness (for example, World Bank Institute (WBI) governance indicators, Country Policy and Institutional Assessments (CPIAs) and Business Environment and Enterprise Survey (BEEPS) to (b) assessing the scope for political change and reform (commitment, constraints and risks) (for example, participatory approaches and anti-corruption diagnostics) to (c) problem specifi cation and reform design (for


140


example, tax administration diagnostics and expenditure tracking). The next step is (d) managing the politics of reform and ensuring sustainable implementation (for example, stakeholder assessments) and fi nally, (e) monitoring and evaluating the results and adjusting the reform process (scorecards and surveys).

The brief emphasizes the importance of detailed, reliable and specifi c data, as well as the use of a range of tools and data sources in order to enhance reform programmes.


141

ANNEX 1

Semi-structured qualitative interviews on incentives in the context of a literature review of the role of incentives for civil servants in capacity development policies.

Basic informationCountry:Professional background: Occupation:

I. Empirical part

Prevailing practice, experience and views on core incentives and HRM tools (and their effect on motivation): Are they useful? Why? How are they perceived by employees in general? What changes should be made in order to improve their functioning?

• Training: participate in types of training other than that offered by the IIEP? In-service training? Did you feel more comfortable and competent afterwards? Offered to everyone in the ministry on your level? How are candidates selected? Will the training help meet the requirements of your job? Will it help you advance professionally?

• Career prospects: progress, promotion process (linked to performance or seniority)?

• How did you end up/why are you working in the Ministry of Education? (Gives an idea of past motivational factors)

• Work environment: good working relationships with colleagues and superiors? Envy among staff, individual success? Turnover?

• Supervision (control vs. support and recognition/ appreciation and feedback)

Frequency, at regular intervals? Is it taken seriously? Needs-oriented? Improve personal knowledge, update knowledge.


142

Annex

• Leadership: good communication, good treatment of staff. Do you think supervisors need training on management and leadership issues? Vision/mission?

• Performance assessments: setting and achieving goals. Is it relevant? Do you know which indicators are used? Are they fair? How do you think good performance should be rewarded? Is good performance linked to career development? Do you feel you’re making an impact?

• Financial incentives (salary, allowances, bonuses): performance or seniority based?

• Non-fi nancial incentives (holidays, insurance) ?

II. Theoretical part (The three theoretical questions are based on Mathauer and Imhoff (2006).)

1) What does being motivated (boosting work spirit or work morale) mean to you and what motivates you? (General defi nition)

2) Which of these listed aspects currently encourages you to undertake efforts to do your work well? (Gives an idea of present motivational factors)VocationProfessional conscienceProfessional satisfactionRecognition by supervisorsRecognition by the public/citizensGood work environment Means and material available

3) How do you consider that your motivation and willingness to perform may improve? (Gives an idea of future motivational factors)Better living conditionsSalary and/or allowancesWork environmentMaterials and meansTraining SupervisionRecognition


143

Annex

III The wider country context

• Public sector situation in the interviewee’s country. Have things improved?

Informal practices, unoffi cial fees, dual practice, unethical practices. Examples of obstacles to reform: lack of fi nancial and human resources, political leadership and commitment, bureaucratic support to reform. Room for change?

• Any differences between the situation in the education sector and other sectors? Sector-specifi c challenges?

• Are issues related to incentives (salaries and beyond) often discussed and subject to reform in your country?

• What do you consider the main challenges/obstacles for an effi cient civil service?

• Knowledge of any recent, innovative and successful reforms in the area?

• Donor involvement in this area? Example: World Bank and the UNDP

• What do you think is the key to achieving a successful civil service that performs well and effi ciently while preserving its integrity and professional ethos?


IIEP publications and documents

More than 1,200 titles on all aspects of educational planning have been published by the International Institute for Educational Planning. A comprehensive catalogue is available in the following subject categories:

Educational planning and global issuesGeneral studies – global/developmental issues

Administration and management of educationDecentralization – participation – distance education – school mapping – teachers

Economics of educationCosts and fi nancing – employment – international cooperation

Quality of educationEvaluation – innovation – supervision

Different levels of formal educationPrimary to higher education

Alternative strategies for educationLifelong education – non-formal education – disadvantaged groups – gender education

Copies of the Catalogue may be obtained on request from:IIEP, Publications and Communications Unit

[email protected] of new publications and abstracts may be consulted online:

www.iiep.unesco.org


mailto:[email protected]


The International Institute for Educational Planning

The International Institute for Educational Planning (IIEP) is an international centre for advanced training and research in the fi eld of educational planning. It was established by UNESCO in 1963 and is fi nanced by UNESCO and by voluntary contributions from Member States. In recent years the following Member States have provided voluntary contributions to the Institute: Australia, Denmark, India, Ireland, Netherlands, Norway, Spain, Sweden and Switzerland.

The Institute’s aim is to contribute to the development of education throughout the world, by expanding both knowledge and the supply of competent professionals in the fi eld of educational planning. In this endeavour the Institute co-operates with training and research organizations in Member States. The IIEP Governing Board, which approves the Institute’s programme and budget, consists of a maximum of eight elected members and four members designated by the United Nations Organization and certain of its specialized agencies and institutes.

Chairperson: Raymond E. Wanner (USA)

Senior Adviser on UNESCO issues, United Nations Foundation, Washington DC, USA. Designated Members:

Christine Evans-KlockDirector, ILO Skills and Employability Department, Geneva, Switzerland.

Carlos LopesAssistant Secretary-General and Executive Director, United Nations Institute for Training and Research (UNITAR), United Nations, New York, USA.

Jamil SalmiEducation Sector Manager, the World Bank Institute, Washington DC, USA.

Diéry Seck Director, African Institute for Economic Development and Planning, Dakar, Senegal.

Elected Members:Aziza Bennani (Morocco)

Ambassador and Permanent Delegate of Morocco to UNESCO. Nina Yefi movna Borevskaya (Russia)

Chief Researcher and Project Head, Institute of Far Eastern Studies, Moscow.Birger Fredriksen (Norway)

Consultant on Education Development for the World Bank.Ricardo Henriques (Brazil)

Special Adviser of the President, National Economic and Social Development Bank. Takyiwaa Manuh (Ghana)

Director, Institute of African Studies, University of Ghana.Philippe Méhaut (France)

LEST-CNRS, Aix-en-Provence, France. Xinsheng Zhang (China)

Vice-Minister of Education, China.

Inquiries about the Institute should be addressed to:The Offi ce of the Director, International Institute for Educational Planning,

7-9 rue Eugène Delacroix, 75116 Paris, France


The bookIncentive structures play a crucial role when it comes to capacity development, by motivating individuals and targeting organizational performance. The lack of impact of some capacity development efforts has been blamed in part on the absence of a supportive incentive structure. However, the creation of such structures is not a simple matter, because of the fi nancial implications and more importantly, because of

the possible contradictions between individual and organizational needs.

Moreover, the limited impact of many incentives schemes results in capacity erosion when linked to competing disincentives, such as sustained low wage levels, a lack of transparency in recruitment or promotion based on political affi liation. The lack of knowledge about the effi cient use of non-fi nancial incentives and human resources management tools are additional reasons for failure. This literature review presents several successful approaches to incentives. They target not only performance, but accountability, team spirit or other organizational ‘intangibles’ that may have a positive impact on performance in the long term.

The authorInger Ulleberg worked at IIEP as a research assistant in the programme on capacity development for achieving Education for All. She has Master’s degrees in International Relations and in Corporate Social Responsibility Management.

International Institutefor Educational Planning ISBN: 978-92-803-1344-4

incentive structures as a capacity development strategy in...

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