Administrative and Civil Service Reform - World...

Administrative and civil service reform policy note

NRP September 13, 2004 Final May 2004 Administrative and civil service reform policy note.doc

Administrative and Civil Service Reform

Policy note prepared for Russian Federation authorities

Neil Parison with Gord Evans

May 2004



ADMINISTRATIVE AND CIVIL SERVICE REFORM POLICY NOTE........... 3 OBJECTIVE : ACCELERATE DEVELOPMENT OF G7 STANDARD PUBLIC ADMINISTRATION TO ACHIEVE KEY POLICY OBJECTIVES............................................... 3 (1) ALIGN STRUCTURES AND FUNCTIONS WITH KEY GOVERNMENT POLICY OBJECTIVES........................................................................................................................................ 6 (2) STRENGTHEN POLICY MANAGEMENT CAPACITY AT THE CENTRE OF GOVERNMENT............................................................................................................... 14 (3) IMPLEMENT SYSTEMS AND PROCESSES FOR DELIVERING EFFECTIVE GOVERNMENT PERFORMANCE .............................................................................................................. 17 (4) REBUILD INCENTIVES, ETHICS AND VALUES .......................................................... 25 (5) STRENGTHEN TRANSPARENCY AND EXTERNAL ACCOUNTABILITY ....................... 30 (6) APPLY SUFFICIENT RESOURCES TO SECURE ACCELERATED IMPLEMENTATION .... 31




“The Japanese Government has fostered the exceptionally rapid growth of its free-

enterprise economy using a well-educated and greatly respected civil service”

(Wassily Leontief, 3 March 1992)

“The Soviet Government spent as much on cars and drivers for bureaucrats as it did

on public transport”

(Karl Ryavec, 2003)

Objective : Accelerate development of G7 standard public administration

to achieve key policy objectives

Russia needs a G7 standard public administration to be able to achieve key

policy objectives such as achieving significantly increased economic growth and

doubling GDP; reducing poverty by half over the next three years; and being

able to compete effectively in the global economy. A major restructuring of the

country’s public administration is essential in order to create an investment climate

attractive to Russian capital and to Russian investors; secure significant volumes of

foreign direct investment; and create the conditions for the SME sector to provide the

engine for growth; while at the same time providing appropriate social and other

services to citizens and the population.



Public sector reform is a necessary pre-condition for the Russian Federation

Government to develop and implement effectively its medium-term program of

structural and social reforms; and for it to have sufficient capacity to be able to

manage the effective implementation of thematic reform programs. The aim should be

to create a small, compact Federal civil service able to attract and retain the required

skills and expertise; which displays a strong orientation to client service,

performance, and achieving outcomes; which is corruption-resistant and regarded as

credible by citizens and the private sector; and which produces innovative,

sustainable policies to implement national priorities.

Developing and implementing a public sector reform program of this magnitude

represents a major challenge, the complexity of which cannot be under-estimated. It

will require changing the values and behaviors of approximately one-third of a million

Federal civil servants (and around one million civil servants in total including regional

and municipal levels of government). Experience with similar reforms in G7 countries

shows that significant improvements in efficiency and effectiveness can be obtained

from such a program, but only if accompanied by a clear vision, sustained

commitment from political leadership, and significant investment in the reforms.

While the agenda is daunting, the Russian Federation authorities have made an

excellent start towards putting in place the required legal, institutional and policy

frameworks. A radically improved structure of the Federal Government is being

implemented; initial functional reviews have been completed; civil service reform is

well under way; and budget reform has been launched.



However, the major challenge, successful, sustainable implementation, lies ahead.

First, the Russian Federation authorities face a particular challenge in extending the

desired reforms beyond the Federal Government to the subjects of the Federation and

to municipal and sub-municipal levels. Second, the focus on rationalizing the

structure of government, while important, must be accompanied by improvements in

process and capacity, most notably in the area of strategic planning and policy

development.

In this context, the policy note provides suggestions for consideration by Russian

Federation authorities with respect to gaps that need to be addressed and current

reforms that could be accelerated. The paper focuses on Federal level reforms; but

assumes that parallel reforms should be pursued through providing incentives to and

forming partnerships with administrations of the subjects of the Federation. The main

focus of the paper is on identifying key opportunities rather than presenting a full

assessment of the existing reforms, which are taken as givens. The challenge is to

identify ways of making a real difference more quickly.

Three other points of context need to be made. First, the paper acknowledges the

significant number of highly capable and committed civil servants across Russia’s

public service who are doing an outstanding job in extremely difficult circumstances.

The reforms must create an environment where these civil servants can have

maximum impact and be optimally effective in their work.

Second, while administrative reform and civil service reform are important

components of state reform, they cannot be developed in isolation from other key



reforms such as budget reform and intergovernmental fiscal reform (covered in a

separate policy note). Moreover, the benefits of streamlined structures and a high-

performing civil service will only be fully realized if policy management systems are

modernized (covered later in this paper).

Third, the overall size of the public service (Federal, regional and municipal civil

services) does not appear to be particularly out of line with international comparators,

despite an overall 80 percent growth in numbers over 1992-2002. Much of this was

caused by the need to set up new structures to meet the needs of the developing

market economy, such as the Federal Treasury, the tax service and the privatization

and antimonopoly ministries. Indeed, the aggregate numbers appear to compare

favorably with advanced OECD countries. However, while overall numbers of civil

servants have been reduced over recent years in the Moscow-based Federal bodies of

executive power, there has been in some cases considerable continued growth at the

regional levels. Within the public administration, there are areas of overstaffing as

well as some areas of understaffing. Some key areas of the Government’s work

program are not at present adequately resourced in terms of civil servants.

Correspondingly, there are significant opportunities to achieve major reductions in

staff numbers through the application of IT solutions within government.

(1) Align structures and functions with key government policy objectives

The old government structure and functions were not aligned with the

Government’s key policy objectives. The old structure and functions of the Federal

Government were in many ways more appropriate to the needs of a command rather



than market economy. The old machinery comprised a number of competing,

overlapping structures with unclear internal and external accountability. These

structures included the Government (ministries, state committees, committees,

services, and agencies), as well as the Apparat of the Government, and the

Administration of the President. The existence of these parallel and often duplicative

structures led to a weakening of the policymaking role of line ministries, weak

accountability, poor policy management by the centre, and fragmented decision-

making. Lack of clarity about the purpose of each different type of government body

and of appropriate accountability arrangements between different types of

government bodies significantly complicated internal coordination. The structures of

individual ministries and other bodies were often inappropriate to fulfilling their

mandates or delivering the priorities of the Government’s work-program. This

resulted in the wide use of inter-ministerial commissions to resolve complex inter-

agency issues, which increased transactions costs and undermined the transparency of

decision-making.

To address these issues, the President announced in March 2004 (revised in May

2004) a radically streamlined structure for the Russian Federation Government

and for constituent bodies of Federal executive power. This reform was intended to

tackle issues such as the different types of government bodies; their respective roles;

and the overarching accountability/subordination framework. The reform further

sought to increase the effectiveness of government decision-making and policy

management at the centre of government and of overall government performance.



While government restructuring is often driven more by political interest in building

coalitions and wielding influence than improving efficiency and effectiveness, it

appears from present international practice that structures of government should:

(1) Provide for a clear allocation of mandates, responsibilities and

accountabilities, avoiding ambiguity, duplication and overlap.

(2) Provide for appropriate spans of control.

(3) Be simple and robust, with basic principles clear to all stakeholders. Each

Minister’s set of portfolios should be explicitly and clearly related in some

important way.

(4) Provide for checks and balances within institutional arrangements; and

be set within an appropriate accountability framework to the legislature and

to the three main client groups of the public administration, including:

accountability to politicians (for policy advice, analysis, and evaluation);

accountability to citizens (for service delivery and delivery of public goods);

and accountability to the private sector (for delivery of an attractive investment

climate, level playing field and appropriate regulatory regime).

(5) Promote strong client orientation; and be based as far as practicable on

delineation between policy formulation and implementation

responsibilities.



(6) Facilitate the centralization of strategic policy coordination within a few

bodies at the center of Government, with sectoral policy formulation shifted

to Ministers.

(7) Ensure avoidance of conflicts of interest.

(8) Reflect the country’s priority issues and facilitate achievement of the

Government’s medium-term plan. Structures may change as Government

priorities develop and change – overall Government and individual Ministry

structures should not be viewed as permanent.

(9) Advance the maximum possible decentralization of responsibilities in

service delivery areas to regions and municipalities; but set this

decentralization within an appropriate accountability framework.

The March/May 2004 reform appears to be fully in line with recent international

trends and best practices, particularly in G7 and OECD countries. The new total of

fifteen Ministries and eighteen members of the Cabinet of Ministers is similar to

OECD countries, which average 12 to 15 Ministries; plus the Prime Minister. While

the number of Ministries has been reasonably stable in many OECD countries over

recent years1, the strong trend has been towards a reduced numbers of much more

compact Ministries with a much stronger focus on policy analysis and development.

The new structure of ministries, services and agencies in the Russian Federation also

1 Australia reduced the number of Government Departments from 28 to 18 in 1987, Canada reduced the number of Ministries from 40 to 22 in 1993.



reflects international practice in that it clearly differentiates between a small number

of organizational types within a clear internal accountability framework.

Notwithstanding the recent reforms in the Russian Federation, confusion persists

among civil servants, clients and stakeholders concerning the respective roles and

remits of the new types of government bodies introduced under the new structure. It

could be appropriate going forward to provide for greater clarity in this area through

emphasizing the different characteristics of the different types of government bodies

as follows:

(i) Ministries: The primary focus of Ministries should be on providing policy

support to Ministers in areas such as: strategic planning; policy development;

policy analysis; budget strategy; monitoring; evaluation; and legislative

drafting. Each Ministry will accordingly be more compact, focusing on a

homogenous policy development and analysis portfolio. Ministries will be

funded almost entirely from the state budget, with very limited or no “own”

revenue earnings. Staffing for Ministries will be largely drawn from the core

state civil service - emphasizing merit and innovation in addition to traditional

factors such as discipline, length of service, and loyalty.

(ii) Government services: Government services should be primarily concerned

with the delivery of core, routine services where the client is the Federal

government. The objectives of a government service would normally be

determined by the appropriate Minister. Each government service should

operate within a clear accountability framework established by a specific



Ministry and have a clear reporting arrangement to a specific Ministry. The

source of funding for such services will be primarily the state budget, but may

include retention of some revenues collected. Bodies such as the tax service and

the customs service represent classic government services: the client of each of

these is primarily the Government overall; and policy discretion is at a

minimum.

(iii) Executing Agencies: Executing agencies should be delegated and devolved

public bodies which are primarily concerned with the delivery of specific

services to citizens and to the private sector in areas where the public sector has

comparative advantage and where it is not felt by the political elite for it to be

appropriate to decentralize responsibility for provision of service delivery to

regions or local governments. The policy priorities and service objectives of an

executing agency are normally determined by the accountable Minister. Each

agency should operate within a clear accountability framework established by a

specific Ministry and have a clear reporting arrangement to a specific Minister.

The source of funding for such agencies will include the state budget, and may

include also some revenue earnings.

(iv) Regulatory Bodies: A fourth type of government body should perhaps now

explicitly be created - regulatory bodies - i.e., arms-length bodies with statutory

independence to ensure fair, effective functioning of government and the private

sector in areas such as: energy, financial markets, competition, and the

environment. Other types of autonomous bodies, such as the state statistics

body, may also be treated as regulatory bodies to ensure long-term predictability



and independence in the delivery of their mandate. This would promote private

sector and public confidence in such agencies and their work.

In addition, Corporatized State Owned Enterprises (SOEs) could be set up under

the next stage of restructuring reforms. SOEs would be set up to deliver services

which can be operated along private sector lines. As such, they could be

commercialized and corporatized, and, in time, become candidates for privatization.

SOEs will need to establish a clear contractual relationship with a particular Ministry

and may enjoy significant revenue earnings to offset previous subsidies and reduce

budget dependency.

Once implementation of the new structure has been completed over the next few

months, a second stage program of ministry/service/agency level functional

reviews should be implemented. These would ensure that the structure, functions,

staffing levels and performance objectives of each of the new bodies were fully

aligned. These functional reviews could also identify and functions or services to be

(i) set up as corporatized SOEs; (ii) privatized; (iii) decentralized to regions or

municipalities; (iv) transferred to self-regulating bodies, as market conditions and

institutional capacities permitted; (v) identified for outsourcing or for market testing

through external tendering; (vi) set up as non-profit making organizations, or as

public/private partnerships; or (vii) simply eliminated (see decision-tree below).



Using functional reviews to allocate functions to different types of government bodies

Disaggregate funct ions:P olicyCo-ordinat ionService deliverySupportRegulat ion

Is th is funct ion"inherent ly

government al" because ofits complexity and

polit ical sensit iv it y?

Could this funct ionbe undertaken by

subnat ionalgovernment? Regard as inherent ly

governmental - locat ewit hin cent ralgovernment

Devolve ordecentralize

Is t here orcould there be a

market?

no

yes

yes

Can governmentt olerat e t he risk

of closure?

W ill cont ingentliabilit ies beexacerbated?

yes

Leave t o the privat eor not -for-profit

environment

no

Can this servicebe contract ed

out?

Are cit izens orbusinesses

willing/able topay the fullcost s of t he

service?

yes yes

no

Cont ract from t heprivat e or not -for-profit

environmentyes

no

yes

no

no

Decision made that funct ions arest ill necessary

The above arrangements require the creation of a hierarchy of different types of

government bodies, including a two-tier system within the structure of the Federal

Government where each government service and executive agency (and corporatized

SOE) operates within a clear accountability and reporting framework to a specific



Ministry. This will clarify the legal and budgetary status and the performance

management system under which the parent ministry will secure appropriate

performance from each service or agency falling within its remit.

(2) Strengthen Policy Management Capacity at the Centre of Government

The restructuring of the Russian Federation Government should lead to the Cabinet of

Ministers being better able to enforce individual ministerial accountability. Cabinet

Committees could be established to support effective inter-Ministerial coordination

and effective joint working. For example, there could be a standing Cabinet

Committee for issues relating to the Government’s economic and structural reform

program; one relating to the Government’s social program ; and one relating to state

reform issues. Further ad-hoc Cabinet Committees could be formed as required (e.g.,

on banking reform or WTO accession).

The intention to undertake a radical restructuring of the Apparat of the

Government also appears to be fully appropriate; and indeed will be essential if the

new structure of government is to operate effectively. The Apparat of the Government

should focus increasingly on Government-wide strategic planning, policy evaluation,

supporting the Cabinet of Ministers in managing the Government’s work program,

and monitoring the substantive implementation of the overall Government program

and of specific individual Government decisions. Given that Ministries would have

unambiguous responsibility for the development of sector policy, this would imply

that sectoral departments would transfer from the Apparat of the Government to

Ministries (particular attention would need to be paid to retaining the significant



expertise which exists within these Apparat departments within Government). To

fulfill its strategic policy management and coordinating role, the Apparat of the

Government would need to be small but comprised of staff of extremely high quality.

Consideration could be given to structuring the Apparat as a Government Secretariat

or Cabinet Office. Similarly it would also be positive if policy management

responsibilities within the Administration of the President were kept under review in

order to eliminate overlap and duplication with functions undertaken by the

Government.

Structural changes will need to be accompanied by far-reaching changes in the way

that policy objectives are planned, developed and implemented. The gap between

policy intentions and the concrete results actually achieved may arise at any point in

the process of policy implementation. For the government, the net result is broken

promises; for the public or businesses it is poor service and unpredictability.

The overhaul of the policy process and the way in which policy is managed by the

center is fundamental to the Government being able to deliver on its work program

priorities and commitments to the public. Policy management reform will need to be

accompanied by and integrated with budget reform. International practice suggests

that a robust policy process should possess the following qualities:

• strategic - policy decisions are taken within a medium and, where feasible,

long-term planning context, are consistent with a broader vision, and are

shaped by appropriate assessments of risk and sustainability



• integrated - policy decisions are informed by financial and human resources

considerations, and vice versa

• coherent - policy decisions are consistent in concept and application both

within a particular policy field and also across related policy fields

• contestable - single options are discouraged; every major policy assumption is

carefully tested, debated and challenged

• continuity - once taken, policy decisions are likely to remain in effect for a

reasonable period of time; subject area expertise is developed, valued and

retained

• creative - innovative thinking is encouraged and rewarded

• cost-effective - policy decisions provide value for money by maximizing

impacts within available resources

• consultative - policy development engages interested parties outside the public

administration (e.g., civil society, private sector, academia)

• performance-driven – the goal of identifying and maximizing concrete results

influences all stages of the policy process (ex ante and ex post).



In the Russian Federation, the Apparat of the Government should be expected to play

a leading role in designing and implementing these reforms on behalf of the Cabinet

of Ministers.

(3) Implement systems and processes for delivering effective

government performance

While it is important to complete the implementation of the new government

structure, it is of much more importance to develop and implement the systems

and processes which are required for the new structure to be able to operate

effectively. Implementation of the new structure is in itself unlikely to secure the

desired outcomes of administrative reform.

An effective performance management system will be driven by two sets of factors.

Organizational and individual goals and accountability must support the achievement

of the government’s policy priorities. In addition, all ministries must be able to deliver

effectively and efficiently their legal mandates. The set of systems and processes

which need to be developed and put in place is shown below.



Developing systems and procedures for managing Government performance

Functionalreview

Processreengineering

IT systemsmodernization

Ministrystatute

Administrative regulations

Service standards

Job descriptions

Transparency

Performancemanagement

Internal accountability

External accountability

Performanceappraisal

Merit, pay, ethics and values

Performance budgeting

To ensure coherent organizational mandates, it is recommended that a second wave of

ministry/service/agency level functional reviews be undertaken. These would be

combined with exercises to undertake business process re-engineering of key

processes within the ministry/service/agency in question. Proposals would be

developed for IT modernization to deliver the revised agreed set of functions and

supporting business processes.

A new ministry/service/agency statute (polozheniye) would then be developed to

reflect the agreed set of functions. This in turn would be underpinned by a set of

administrative regulations to prescribe how the agreed set of functions would be

delivered. Associated service standards would then be developed. Individual

employees would then be assigned objectives and responsibilities through individual

job descriptions.



A parallel system for performance management would also then be developed. This

would add three year and one year priority objectives for the ministry/service/agency

in question. This would in turn provide the basis for control of performance of the

ministry/agency/service in question through a system for internal accountability. A

framework for external accountability based on the actual performance achieved

against the service standards defined for the ministry/agency/service in question.

Individual performance appraisal of the work of employees would be undertaken in

the context of all the above systems and processes. The system for performance

management would of course be closely linked to the system being developed for

performance based budgeting.

The whole set of systems and processes described above would be underpinned

further though a system-wide approach to securing maximum transparency both

internally and externally; and through ongoing implementation of civil service

reform to put in place the merit principle and provide a framework for rebuilding

incentives through pay reform, performance based career development, and the

development of approaches to supporting new values and ethics in line with those

required for the effective operation of the remodeled public administration.

When undertaking the second stage ministry/service/agency functional reviews, it will

be important to avoid locking in place existing inappropriate and inefficient processes

and approaches. It is suggested therefore that the functional reviews be combined with

an exercise to undertake where possible functional restructuring and rebuilding of



existing business processes. IT applications can then be developed to support the

efficient delivery of the re-engineered structure, functions and processes.

To give a specific example of what is possible in this area, it may be helpful to

consider the process re-engineering of business registration (undertaken in the context

of the World Bank-supported tax administration program). Before restructuring, this

process took around six months, and involved ten to twelve different

ministries/agencies, and masses of paperwork and “stamps/visas” indicating formal

approval given to a stage in the process. This has now been restructured so that a

single agency (the old Ministry of Taxes and Revenues) undertakes all the required

liaison with all other ministries/agencies. The courts are no longer involved in the

process. The new process requires a fraction of the information and information

resources of the old process. Paperwork is now kept to a minimum; and electronic

registration can be completed in two days (maximum period is 6 days).

The problems of inappropriate structure and functions were severely exacerbated in

the old structure by extreme inefficiencies in business processes and systems. While

the Russian private sector over the last fifteen years has made full use of emerging IT

systems and approaches, and while IT services is itself a comparative advantage for

Russia, the public service lags far behind. The Russian public service is massively

under-computerized; makes almost no use of email; has no effective Government

Intranet to speed internal business processes; and has very little electronic service

delivery. In addition, Russia was for several decades isolated from modern

management theory. Strategic planning, impact analysis, investment appraisal and



human resource management remain particularly under-developed in the public

sector.

Again, the problems of course are recognized and a start has been made to address

these problems, notably through the Electronic Russia Program (there are also a

number of major public sector modernization projects involving significant IT

developments and financed in part by the World Bank in the area of tax, customs and

treasury), and through the Program for Modernization of the Federal Civil Service.

However, the financing made available for Electronic Russia has been nowhere near

what is required to make a real difference in this area; and little attempt has been

made to integrate and seek synergies and savings from a structured approach to

managing IT development projects and budgets across the Federal government

(compare this situation for example with the Federal Enterprise Architecture

Program of the US Federal Government).

Care needs to be taken with sequencing of these reforms. It is important to complete

the processes of functional restructuring and rebuilding of business processes before

seeking to encapsulate functions and processes through development and

implementation of IT solutions. This has a number of implications. Firstly, there need

to be clear criteria established for the functional restructuring and rebuilding of

business processes for those functions judged by the functional review exercise as

being required to be provided by the ministry/service/agency in question. Secondly,

an overall standard approach needs to be developed for:



(i) encapsulating the rebuilt business processes in electronic administrative

regulations and procedures;

(ii) adopting a common approach to building the information/data architecture for

government IT systems;

(iii) seeking to base government IT systems on common core business processes

and systems components wherever possible; and

(iv) subjecting all government investments in IT to scrutiny to ensure appropriate

integration and commonality of approach can be built in from the outset. This

also represents a major culture change with respect to how IT projects and

systems are developed and implemented within the Federal civil service.

There are also a number of key developments which need to be undertaken at the

government-wide level, including development of a government Intranet, email, and

management information and monitoring systems. A common approach also needs to

be developed, as foreseen in the Electronic Russia Program, for delivery of

government services through the Internet (electronic service delivery), including

building a network of local access points for citizens and small enterprises at

municipal and sub-municipal level. Priority applications could perhaps include an

Internet registry of all regulatory regimes (Federal, regional, municipal) including

forms to be completed; contact points; how to submit; service standards; fee; which

could in time be developed so that all regulatory permissions (registrations, permits,

licenses) are applied for on-line with no direct face-to-face interaction between the

applicant and a public official.



The next question which arises is how best to ensure that performance management

and monitoring arrangements and an internal accountability framework can be

developed and put in place to ensure that each ministry/service/agency is actually

delivering effectively the objectives, functions and services falling within its remit.

This is perhaps particularly important given that there are at present within the

executive a number of concerns about the effectiveness of internal accountability

arrangements for managing government performance.

Firstly, there is a concern that control at the center of government over the

implementation of Presidential decrees and Government decisions is comparatively

weak; and concern that there is weak accountability for poor performance in this area.

Secondly, there is a concern that the plans and targets of individual ministries and

other bodies of Federal executive power do not adequately reflect the responsibilities

and accountabilities of these bodies for implementing those components of the overall

government work-program which fall within their remit. Thirdly, there is a concern

over how effectively ministry level responsibilities and accountabilities are reflected

in the responsibilities and accountabilities of directorates and departments within that

ministry. Fourthly, there is a concern over the extent to which at the individual

employee level their activity is focused on the key priorities for their

directorate/department and their ministry overall.

There is a suspicion that much of the effort of many civil servants is devoted towards

tasks and activities which bear little if any relation to the key priorities of the

government overall or of the individual ministry in question. While it is expected that

many of these concerns will be addressed in the second stage of administrative



reform, and partly also through the continuing implementation of the Program for

Modernization of the Federal Civil Service, consideration could perhaps appropriately

be given to approaches such as the following.

Firstly, the Apparat of the Government (perhaps itself restructured into a Government

Secretariat as outlined above) could play a broader role in ensuring that the outcomes

desired from implementation of the Government’s work-program are achieved

through a significant upgrading of the monitoring and evaluation undertaken by the

Apparat of the work of individual ministries/agencies. It is essential that this initiative

not be confused with an attempt to extend further central control. In fact, over time,

ministries should be delegated greater authority. Monitoring by the Apparat should be

confined to the strategic level : i.e., ensuring that the anticipated policy outcomes of

the government’s priorities are being achieved. A similar strategic focus will emerge

with respect to performance budgeting and the relationship between the Ministry of

Finance and line ministries.

Secondly, an integrated hierarchical system of performance management could be

developed whereby key three-year and annual targets for each

ministry/service/agency are formulated out of a disaggregation of the overall targets

and priorities of the government’s medium-term socio-economic program. Targets

would then be developed for each directorate/department within the context of the

ministry/service/agency-level targets. Finally, targets for individual employees and

work groups would then be developed in the context of the directorate/department

level targets. This performance management system would be fully integrated with

the planned performance budgeting system.



The system would also include the upgraded staff performance appraisal system being

developed in the context of implementation of civil service reform as foreseen in the

Law on the State Civil Service. This approach would also have implication for how

job descriptions for individual civil servants are developed and updated to ensure that

these continue to reflect current key priorities. This would also need to be integrated

with the approach to developing administrative regulations and procedures

(administrativnye reglamenty) for ministries/services/agencies.

(4) Rebuild incentives, ethics and values

Assuming appropriate structures, functions, systems and processes can all be put

in place, underpinned by a system for performance management, the next task is

to ensure that the civil servants who have to implement and give life to this

framework have appropriate incentives, skills and values. At present, while there

are notable exceptions throughout government, in many cases a public service ethos is

either completely lacking or severely eroded; and in many areas there are significant

skills shortages and mismatches arising out of severe recruitment and retention

problems.

One of the main priorities of the Program for Modernization of the Federal Civil

Service is of course explicitly to address this issue. Excellent progress is being made

to signal the change from a state service to a civil service; and to put in place the

policy and legislative framework to support the creation and maintenance of an

appropriate skills mix and an appropriate values and ethics base for civil servants,



together with tougher monitoring and sanctions. Careful attention has been paid to

seeking to rebuild the internal incentives and stimuli necessary to generate changes in

vales and behavior on the part of Federal civil servants. Strong efforts are being made

to secure implementation of the merit principle as the core building-block of the new

state civil service and to move to a performance-based human resource management

system. This in itself represents a fundamental reform, and it will require a few years

before the changed values and behaviors are likely to be capable of being observed.

At the same time, it could perhaps be appropriate to seek to accelerate progress in

three areas linked to this agenda : pay reform; internal delegation; and management

development and on-the-job training.

Greater priority could perhaps be given to seeking to achieve a major rebuilding and

strengthening of management and professional staff within the Federal civil service

through more aggressive pay reform. Three problems need to be addressed. Firstly,

pay levels in the Federal civil service are extremely compressed. At present in the

Federal civil service the decompression ration for category 2 specialist to Deputy

Minister is 1:3.7. Most OECD countries have ratios of between 1:7 to 1:20 to allow

for recruitment and retention of sufficient qualified management and professional

staff. Pay reform should include major decompression measures.

Secondly, civil service pay for the Federal civil service in Moscow is not competitive

with the private sector.



The results of a recent comparative pay and benefits survey of the Federal civil

service and the private sector in Moscow showed that at Deputy Minister level total

compensation in the private sector was 3 to 6 times higher. It is suggested that

aggressive pay reform be pursued focusing on managerial levels. As an example, if

pay increases of 45% were made over each of five years to Ministers, Deputy

Ministers, and Top and Chief specialist grades, which would represent around a six-

fold increase at the most senior levels, the wage bill would increase in year 5 to 0.33%

of GDP compared to 0.29% in the baseline; the nominal wage bill would be 15.5%

higher than in the baseline; and the total cost would be in the order of $100 million

(based on 2001 data).

The third issue in the area of pay reform relates to internal incentives and external

perceptions. At present, for deputy ministers, the share of total cash (base pay plus

Comparison of Total Compensation, Civil Service & Private Sector

0

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cash allowances) in total compensation is around 40%; and the share of base pay in

total cash is around 25%. It is suggested that as part of aggressive pay reform moves

should also be made to monetize benefits, privileges and non-cash compensation;

and to shift the balance from allowances to base pay, while making any remaining

allowances dependent on performance. This would strengthen internal incentives

toward strong performance. This would also potentially have some positive impact on

external perceptions.

At present the perception is that civil servants receive a host of perks, including

access to fee/subsidized high-quality health care, education, rest and recreation, free

utilities, greatly subsidized housing, free transport/car/driver, access to cheap food

(and books). While the full package of such benefits is now received only by a small

number of most senior public servants, public sensitivity to nomenklatura benefits

remains strong. This is even further exacerbated by resentment at further privileges

enjoyed by senior public officials (blue lights on their cars, special privileges and

priority in driving). The opportunity afforded by radical pay reform should be taken to

also clean up all these non-cash perks, benefits and privileges. Given monetization of

non-cash benefits, senior civil servants should be expected to pay a market price for

housing, health and education benefits. The facilities themselves should be opened up

to all on a market basis. Privileges not compatible with the new image of a civil

servant serving the public should be removed (e.g., blue lights).

Finally the opportunity of radical pay reform must also be taken to draw a line under

the acceptability of corruption on the part of senior civil servants; with this then

cascaded down within the civil service. A compact needs to be made that given the



pay reform, corruption will either now cease or be punished. Monitoring and

sanctions need to be real and made to bite. Conflict of interest provisions would need

to be tightened considerably. Links of public officials to private sector economic

interests and internal lobbying and protection of such interests would need to be

aggressively pursued and routed out. Meaningful declaration of personal and family

assets and earnings would need to be enforced. Restrictions on senior public servants

taking up positions in parts of the private sector related to their previous official

activity would need to be put in place. Radical pay reform and the package of

accompanying measures as set out above could lead to a major improvement in civil

service capacity and values; and, in time, to a significant lessening of corruption and a

gradual increase in public confidence in the civil service; and to increasing external

pressures from enterprises and citizens for appropriate behavior on the part of civil

servants.

Moves could be undertaken in parallel with pay reform also to seek to achieve a

significant delegation of real responsibility within the civil service. This represents

a major opportunity to clear the time of Ministers and Deputy Ministers to focus on

real strategic, policy, delivery and management issues. This would also represent a

major culture change within the present civil service. The policy and legislative

framework to support such a shift would be supported by the accountability

framework provided by performance management and performance appraisal; and by

administrative regulations and procedures; and by new job descriptions. The

development of new electronic business processes and IT systems would allow such

delegation of responsibility to be undertaken in a context of full transparency. Given

the above, there is more than a good chance that this approach could be made to work.



This would also make a major contribution to strengthening the effectiveness of civil

service performance.

Finally, if the significant investments foreseen in the recommendations above were

indeed to be made, it would of course make it even more critically important to

provide proper maintenance expenditures to support these significant investments in

people and systems and processes through completing the envisaged major rebuilding

of approaches to management development and on-the-job training in the civil

service (including of course distance and electronic learning and delivery of such

programs).

(5) Strengthen transparency and external accountability

The reform measures described above would need to be complemented by

further measures targeted specifically at strengthening transparency, external

accountability and external participation. The second round of functional reviews

should lead to greater decentralization in service delivery which should strengthen the

ability of service recipients to affect the service offer. The creation of executing

agencies for service delivery should provide greater opportunities for clients of such

services to express their requirements for these services, particularly when service

provision is linked to external competition and competitive tendering.

Good progress has already made to provide the policy and legislative base for

transparency through the draft Access to Information Law. External monitoring

(possibly by an NGO) should be encouraged to ensure that the provisions of the Law



once enacted take effect and are applied as intended as quickly as possible. It would

be reasonable to expect there to be a transitional period of one to two years while

enterprises and citizens got used to their right to request information (although it is

hoped that much information would anyway be available through government internet

sites) and to exercising such a right; and while public officials got used to meeting

such requests fully and expeditiously as required under the new legislation.

The measures described above would also provide a good basis on which external

accountability could be strengthened through the development of service standards;

the publication of such service standards; the monitoring of actual performance

against service standards; and the compilation of annual reports on actual

performance against standards, both at the level of government overall, and of each

individual ministry/agency. Additionally opportunities could be sought to give service

users and stakeholders greater opportunity for direct participation in decisions on

services affecting them directly.

(6) Apply sufficient resources to secure accelerated implementation

Securing appropriate development and implementation of the new Federal

government structure and of the systems and processes required for the new

structure to operate effectively will require significant investment. The set of

reforms described above requires significant reform management capacity; and will

require significant investments to cover the costs of undertaking the functional

reviews and process re-engineering exercises and the development of IT approaches.



Pay reform and upgrading the system for management development and civil service

training also has potentially significant fiscal costs.

Reasonable progress was made over 2003 in building up capacity to manage the

program of administrative and civil service reforms with the creation of a

Directorate for Administrative Reform in the Apparat of the Government; the creation

of the Civil Service Directorate in the old Ministry of Economic Development and

Trade; and the strengthening of the Civil Service Department of the old Ministry of

Labor and Social Development. Maximum use was also being made of the Russian

community of experts and academics through the tenders let under the Program for

Modernization of the Federal Civil Service. The application of lessons and approaches

from international experience is being supported through a number of major donor

programs.

Further attention could however be paid to processes of internal consultation and

communications, including the restoration of a Civil Service Journal (hard copy and

online version). As well as the annual report planned on progress in implementing the

Program for Modernization of the Federal Civil Service, an overall annual report on

the performance and effectiveness of the civil service could also be produced,

submitted to the State Duma and widely disseminated to external stakeholders.

It is clear however that just as certain aspects of the reform program could be

accelerated, the financing of the reform program will also need to be increased. Part

of this additional resourcing could be found through more effective integration of

financing already provided to support training and IT developments. Part could be



found through making increased investment in these reforms, perhaps through a

Federal Fund for Federal Government Reform, which could seek to provide incentives

for ministries/services/agencies to compete to go through reform measures and attain

reform outcomes and thereby receive additional financing which could cover further

IT investment and training and development. This could function perhaps in a way

similar to the Regional Government Reform Fund for fiscal reform, which could be

extended to cover also regional administrative and civil service reform.

It should also be accepted that development and implementation of the program of

reforms now being pursued will need to be pursued on an iterative basis.

Implementation risk (capacity and financing constraints) will need to be mitigated.

The reform team will need to be able to respond flexibly; and to quickly disseminate

success stories and learn from the intended and unintended results of reform

implementation. This could be facilitated through extensive use of pilots and

experiments across the system. Seeking to stimulate the pursuit of similar reforms at

the level of the subjects of the Federation and of the new municipalities will also

represent a major challenge. Incentives and partnership arrangements will need to be

developed to help stimulate such reforms. In time it could also prove appropriate to

seek to extend the principles of the reforms to cover also key public sector service

delivery areas such as education and health. Finally, a system and process for

monitoring the outcomes of these reforms should also now be developed and put in

place at the outset of reform implementation.

Administrative and Civil Service Reform - World...

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