1

PROGRESS IN GOVERNANCE REFORM: CONDITIONS FOR EVIDENCE,

CONSULTATION AND PARTNERING

Mr. Rolf Alter, Director, Public Governance and Territorial Development, OECD

Draft 15/05

2

Better governance is now recognised as a key to global recovery

The OECD Secretary General has called the global crisis a “wake up call” to

policymakers around the world. Market and governance failures led to the most pressing

financial, economic and employment crisis of our lifetimes. OECD Ministers of Finance have

been forced to recognize that the idea of a self-adjusting growth model with a single general

equilibrium has been tested and found wanting. In parallel, longer-term global trends – i.e.

globalisation and shifting wealth, population growth and ageing, natural resources constraints

and skill-biased technological change – put pressure on economies and restrict the margin for

manoeuvre of individual governments and increase the pressure for co-ordinated international

responses. The conclusion of the OECD at its most recent high-level meetings has been that

returning to business as usual is not an option. Going forward, OECD intends to “reflect,

revisit and to rethink” its fundamental assumptions and methods to try to develop a more

sustainable and inclusive economic model.1

Given the origins of the crisis in regulatory and governance failures, the issue of

institutional reform is prominent in the search for new ways to achieve better policy

outcomes. Indeed, the Secretary-General of the OECD underlined that institutions, the

political economy of reform, ineffective implementation, and individual behaviour “need to

be better reflected in the way we deal with policy challenges”. In other words, strengthening

and re-valuing the role and performance of governments, and addressing implementation gaps

must be an important element to improve the working of market economies.2

These are important assertions because they place good governance at the centre of a

new approach to economic policy. Economic thinking has often tended to ignore the

importance of government‟s capacity to design and implement, making too many overly

1 OECD 2012 Ministerial Meeting, 23-24 May; “Strategic Orientations by the Secretary-General”

C/MIN(2012)1, “New Approaches to Economic Challenges” C/MIN(2012)2. 2 Ibid.

2012 Strategic Orientations of the OECD Secretary General

“At this critical juncture, the OECD will need to reinforce its work

on public governance to drive real change in the public sector. Facing all

these challenges will require more strategic, effective and forward-looking

governments…”

3

optimistic assumptions about the evidence base for decision-making and translation of policy

into action. New economic thinking in response to the crisis must accept the central role of

governance in determining policy outcomes. It must recognize its importance but also the

challenges and limitations. This suggests re-evaluation of governance across many

dimensions -- from strengthening the strategic capacity of governments, all the way to

regional and local delivery of services and to communication with citizens.3

Consolidation and investment for growth are the main challenges; but both depend on

strategic capacity

The crisis has reopened debate about the role of government in society. To what extent is

government itself an effective steward of the public interest. To what extent are governments

really effective in shaping the framework for markets? It is undeniable that governments face

many new constraints, some related directly to the crisis but many resulting from longer-term

trends. Resources to deliver the level of services that people expect are increasingly scarce.

Civil society organizations demand action and inclusion in ever more vocal ways. Trust and

confidence in public authorities has been hit hard by the crisis. Countries are increasingly

exposed to risks from major global shocks and disruptive events. Internet and information and

communications technologies offer opportunities for networked governance, yet also create

many new challenges, for example those raised by social media. Although some countries

have proven themselves to be more resilient to the impact of economic crisis than others, the

range of pressures faced by all government remains daunting.4

In simple terms, the challenges for government have four dimensions that need to be

addressed simultaneously: (1) ensuring strategic capacity (i.e., reconciling short-term policy

choices with longer-term trends and pressures), (2) consolidating public finances, and (3)

investing for growth. These are clearly inter-dependent. Consolidating budgets could suggest

a reduced level of public investment. Addressing long-term consolidation needs could suggest

governments will be locked into mechanistic paths that allow little room for dynamic strategic

leadership. Both citizens and business, not to mention the media and international capital

markets, are watching closely to see how governments strike balances among complex

objectives.

3 For a thorough examination of the evolution of the international governance debate, see Leslie A Pal (2012),

Frontiers of Governance: The OECD and Global Public Management Reform.

4 The issue of the role of the public administration and the new challenges faced by public servants are

extensively examined in Jocelyne Bourgon (2011), Serving in the 21st Century: A New Synthesis of

Public Administration, and Christopher Pollitt and Geert Bouckaert (2011), Public Management

Reform: A Comparative Analysis.

4

Responding to the challenges of the crisis

CAPACITY

To steer, lead,

provide visibility

CONSOLIDATION

To balance

budgets

INVESTMENT

To respond,

innovate,

mobilise

TRANSPARENCY

To be accountable

CITIZENS,

MARKETS

Building

Trust!

The ability of government to make progress in these different spheres at once is more important

than ever. Recent events have underlined that public governance is a long-term project in need

of some renovation. If countries fail to invest in public governance systems, capacities and

structures, we should not be surprised if the public governance machinery seizes up –

resulting in delayed decisions, compromises that fail to tackle underlying problems, and

public policies that fail to deliver. The post-crisis period has provided many illustrations of

this – protracted budget negotiations in several major economies being the most obvious

examples.

To a large extent, the burden for ensuring that the right trade-offs are made rests with the centre

of government. The centre of government (prime minister‟s office, government office,

Chancellery, etc.) plays a key role in ensuring that this long-term investment happens and that

obstacles to effective decision-making are minimised or removed. Yet, the pressures on

decision-makers at the centre are intense, and the turnaround time for decisions has

accelerated. The rapidly evolving context tests the ability of the centre of government as an

institution to adapt and respond.

Centres of government remain indispensable pillars of effective strategic decision-

making for two reasons. First, they provide advice and guidance to the prime minister,

president or cabinet. As such, their strategic thinking feeds directly into decision-making at

the highest level and helping to counter-balance trends to short-termism – an extraordinary

privilege, but also a heavy responsibility (which assumes strong analytical capacity within the

central government office). Second, they are involved in translating decisions into actionable

“orders” for ministries and departments and monitoring implementation.5

5 OECD (2011), Meeting of Senior Officials from Centres of Government, Ottawa 2011, “Introduction and

Session Notes”.

5

Reviews of public governance in several OECD countries have concluded that an

effective centre of government is critical for strategic decision-making. But there have been

concerns that crisis decision-making processes tended to sideline strategic thinking and reduce

the capacity of the centre to ensure that longer-term considerations were adequately taken into

account. Moreover, the actual resources of the central agencies to carry out their tasks have

not always evolved to keep pace with new demands.

This leads back to the issue of how governments can deliver strategic policy. Senior

officials from centres of government underlined in recent OECD CoG meetings that the basis

for good policy must be the use of evidence to support decision-making. While being fully

aware that the ultimate responsibility for decision rests at the political level where many

different considerations are included in the equation, they stressed that being able to draw on

relevant and timely data remains primordial.

The evidence base for policy making remains the prerequisite for a strategic state

Supporting evidence-based policymaking with relevant and reliable data has been the

priority of the delegates to the OECD‟s Public Governance Committee for several years now.

This reflects their concern about the standard of governance indicators and the importance of

making progress in this area.

Nowadays it is hard to imagine a debate on government performance that would not

include quantification of the money spent (inputs), the quality of government processes, the

quality and quantity of government outputs, and the outcomes (or lack of them) eventually

achieved. Extensive academic and practitioner literature are devoted to the subject of these

aspects of government performance, literature which stretches back for at least a quarter of a

century. Yet the measurements of these dimensions (inputs, processes, outputs, outcomes) are

frequently crude or simply missing. This is true even at national level, but far more so for the

purpose of international comparisons. Some existing comparisons are based on surprisingly

weak and narrow data. A few specific areas stand out as beacons of what could, in principle,

be achieved (especially some in education and healthcare, such as the OECD Programme for

International Student Assessment (PISA). The challenges facing comparative measurement go

Why the Centre of Government is crucial for effective decision-making – key strategic roles

ensure that the government‟s deliberations on its strategic priorities take place with the benefit

of a broad assessment of the overall economic, political and social situation;

verify that strategic priorities are harmonised with other strategic documents of the government, such as economic and fiscal strategies, and other key policy and reform strategies;

make sure that the budget preparation process takes account of, and reflects, strategic priorities;

ensure that ministries‟ work plans reflect the government‟s strategic priorities;

brief the Prime Minister or President regularly on new developments affecting the strategic

priorities and annual work plan, and on possible responses or adjustments where relevant.

6

far beyond the issue of missing data. Before a single measure has been made, there are

significant difficulties to be tackled in the conceptualisation or categorisation of the “units”

under discussion. Frequently used terms such as “government”, “civil service” or “public

sector” turn out to have different meanings and different domains in different countries.6

These widely acknowledged data constraints have been one important factor prompting

the Government at a Glance initiative promoted by the delegates to the Public Governance

Committee. This programme aims at improving the general quality and comparability of

government activity data and, more specifically, presenting the data in an accessible form

(Government at a Glance, the third issue of which will appear in 2013). This publication has

already enabled more securely based benchmarking between countries, and should encourage

more effective OECD-wide lesson learning with respect to sector efficiency, process/output

relationships, issues of capacity change and a variety of other aspects.

One feature of this initiative has been an attempt to stabilise an agreed set of categories

for institutional domains (what do we mean by “government”, “the public sector”, etc.); for

stages in the process of producing public goods and service; and for specific aspects of those

stages (particularly “outputs” and “outcomes”). Although this sounds rather technical, it

quickly became clear to practitioners from the 30-plus countries that it is not possible to have

an effective international dialogue without a standardized vocabulary.

Measuring a moving target: from government to governance

While post-crisis public sector reform and fiscal consolidation have brought governance

indicators into the spotlight, radical changes in the way governments function have made the

task of measuring government activity and interpreting the results more difficult. For the last

quarter of a century governments across the OECD have been reconsidering and adjusting

their roles. Some governments have chosen widespread privatisation of public utilities. An

overlapping group of countries have significantly increased the role of the private sector

inside the public sector, through a variety of means including public-private partnerships,

franchising and contracting out. Elsewhere ideas of “co-production” have seen significant

involvement of citizen groups and civil society associations in public service planning,

delivery and evaluation.

A recent essay by Allen Schick in Government at a Glance 2011 defined the notion of

leveraged governance to describe the new modus operandi of government. The essay notes

that enlargement of the state has made it more dependent on others, both to mobilise support

for public policies and to satisfy the rising expectations of citizens. The spread of leveraged

government is result, not of a coherent ideology but rather the problem-solving acumen of

political leaders and public managers. Leveraging is a pragmatic response to limits on

government capacity. Governments leverage because they do not possess all the IT skills

required to run highly-developed economies, or because they do not want to operate complex

health care systems. Many governments have turned to partners to ease pressure on their

budgets or to improve the efficiency or quality of public services. Leveraging “upwards” via

international organizations has also become more common.

6 For a full presentation and discussion, see OECD (2009), Measuring Government Activity.

7

Although it has been driven principally by practical considerations, leveraging

government has drawn impetus from parallel developments in business management – from

Drucker onwards. In many places, while the government may have retreated from directly

providing services itself, it has increased its role as a regulator. In all these cases the boundary

between the public sector and the private sector has shifted and taken on new and sometimes

ambiguous meanings. A reconsideration of what government does, and how we classify and

measure this activity is therefore overdue.7

Focusing on outcomes: the need to measure performance

But measuring the size and shape of government is no longer enough in a context of

budgetary pressure and loss of public confidence. Governments need to be able to assess and

benchmark their performance. Measuring government performance has long been recognised

as necessary for improving the effectiveness and efficiency of the public sector. Following the

fiscal and economic crisis that began in 2008, however, accurate and timely data are needed

more than ever to help governments make informed decisions about how and where to

prioritise spending, reduce costs and promote innovation in the public administration. Indeed,

restoring public finances in the OECD has led many governments to pursue budget cuts,

freeze public sector wages or reduce the size of the government workforce in 2010. Good

decision-making in all of these fields depends on having the right data to make the correct

choices; and on being able to draw on data to show that the choices made are fair, equitable,

transparent, etc.

How government activities are measured matters. Given the size of government and its

role in the economy, the contribution of government to national economic growth is of great

significance, especially when looking at change rates over time. National governments are

still potent centres of public authority and vast repositories of financial and other resources.

By most standard measures, governments have significantly expanded their footprint during

the OECD's half century. In 1960, the OECD's first year, government expenditure in member

countries averaged less than 30% of GDP; excluding recently added members, the average

now is well in excess of 40%. In fact, no member country now has a lower outlay (or revenue)

to GDP ratio than 30 or 50 years ago. Although the pace of expansion has slowed in most

countries and a few have moved to reduce the relative size of government in response to the

recession, big government is here to stay. Most of the increase in public spending has been in

social security and other income transfers. In some countries, escalating health care

expenditures have accounted for approximately half of the total rise in relative spending.

One of the primary conclusions from OECD work on governance indicators has been that

the size of the public sector tells us little about the quality or scope of the service provided to

citizens in return for their taxes. The notion of performance is seen as fundamental to the

modern state, and therefore also underlies the OECD‟s approach to measurement (Schick,

2005).8 This has led to significant reforms within government – and to a deluge of managerial

7 See OECD (2011), Government at a Glance, Introduction

8 Schick, A. (2005). “The Performing State: Reflection on an Idea Whose Time Has Come But Whose Implementation Has

Not”. OECD Journal on Budgeting. 3(2). Paris: OECD.

8

and political rhetoric about the measurement of performance (Pollitt and Bouckaert, 2004).9

These developments are based around the idea that, as the state is responsible for such a large

and changing array of services and regulatory tasks, it must quantify its promises and measure

its actions in ways that allow citizens, managers and politicians to make meaningful decisions

about increasingly complex state activities.

What can we say so far: summarizing what we have learned

The indicators included in Government at a Glance 2011 test the concept of government

performance with new data. The success of this effort demonstrates the desire among a broad

policy community (including policymakers, civil society, the media and others) for this type

of metric for measuring progress with reform of the state. It also shows that we have

addressed the tip of a very large iceberg in terms of approaching a model of an agile,

resource-efficient and high quality public sector.

Data from Government at a Glance reveal the extent to which government expenditures

increased relative to GDP before and after the crisis. In the pre-crisis period between 2000

and 2007, OECD member countries decreased their share of government spending on average

by 0.6 percentage points of GDP. However, after the start of the crisis, the share of

government spending increased by 4.9 percentage points across the OECD during 2007-09.

Only part of this increase reflects declining GDP; another portion also reflects increased

government expenditures sparked by the need to ensure the stability of the financial system

and to stimulate the economy in response to the crisis.10

There is a general consensus in the OECD that public finances in many OECD countries

are on an unsustainable path. To better understand the implications for fiscal policy in the

years to come, the OECD has produced estimates of countries' fiscal consolidation needs.

According to these, on average an improvement of nearly 4% of potential GDP is needed

from the fiscal positions in 2010 just to stabilise the debt-to-GDP ratio by 2026. In addition,

offsets of 3 percentage points of GDP on average will have to be found over the coming 15

years to meet spending pressures due to ageing-related costs including health care and

pensions.11

9 Pollitt, C. and G. Bouckaert. 2004. Public Management Reform: A Comparative Analysis. Oxford, United Kingdom: Oxford

University Press. 10

OECD (2011), Government at a Glance, Chapters II and III.

11 For a full comparison of fiscal consolidation plans and progress, see OECD (2011), Restoring Public Finances

(next edition forthcoming July 2012)..

9

Public finances are in trouble…

Source: OECD Economic Outlook 89 Database.

General government gross debt as a percentage of GDP

(2007 and 2011)%

0

50

100

150

200

250

AU

S

LUX

KOR

CH

E

NZL

SWE

SVK

CZE

NO

R

DN

K

FIN

PO

L

NLD

AU

T

ESP

DEU

CA

N

GB

R

HU

N

FRA

USA

PR

T

BEL IR

L

ISL

ITA

GR

C

JPN

OEC

D a

vera

ge

EU a

vera

ge

2007 2011

0%

5%

10%

15%

20%

25%

Pe

rce

nta

ge o

f p

ote

nti

al G

DP

Ageing related spending 2010-2025

Remaining consolidation needed by 2025

Announced consolidation plans (2011-15)

Countries ranked in order of remaining consolidation needed and estimated ageing-related spending.

Announced measures may not be enough.

Source: OECD “Restoring Public Finances”. Note: Plans announced as of December 2010, currently being updated for summer of 2012.

Spending cuts agreed in 2010-11 are starting to have a visible impact. In most cases,

these cuts will not restore fiscal balance. Indeed, the impact of population aging alone will

make balancing the books a moving target over the next two decades. Nonetheless, the current

wave of public spending reductions will hit daily services to citizens. In order to make the

10

necessary savings, governments are naturally targeting the major spending programmes in

which the public footprint is largest, and hence in which the scope for reducing expenditure is

broadest. But, withdrawing public investment in these policy areas – social protection and

health, in particular -- is hugely unpopular (and, increasingly, contested as an economic policy

strategy).

Structure of general government expenditures by function (2008)

Source: OECD (2011), Government at a Glance.

Alongside cuts to programme budgets, OECD countries are committed to large-scale

staff reductions. Over three-quarters of OECD countries indicate that they are engaged in, or

are planning, reforms that will decrease the current size of their public service workforce in

more than half of the agencies and ministries within central government. None plan to

increase workforce levels. Additionally, fifteen OECD countries have established replacement

ratios to fill the gaps left by staff leaving through retirement. These ratios can range from

replacing 1 in 10 workers in countries such as Spain, to 8 of 10 in Israel or Korea. There is

usually some flexibility built into the regimes (for example, France), but they nonetheless

have an impact on the long-term capacity of the public sector to deliver quality services, a

point made in recent reports such as OECD (2012), Public Servants as Partners for Growth).

13.1 3.8

4.0

11.4

1.7

1.9 14.7

2.7

13.1

33.5

General public services

Defence

Public order and safety

Economic affairs

Environmental protection

Housing and communities

Health

Recreation, culture

Education

Social protection

11

Examples of staff reduction targets in selected OECD countries

Country Reduction

Canada 10% operational budget reductions for all

departments

France 97 000 public sector jobs (50% replacement

rate)

Germany 10 000 federal public sector jobs by 2014

Greece 20% replacement rate; cut in short-term

contracts

Ireland 24 750 public sector jobs by 2014

Portugal Complete recruitment freeze

Spain 10% replacement rate for public officials

between 2011-13

UK 330 000 public sector jobs by 2014 Source: OECD (2011), Restoring Public Finances

The first avenue explored by most OECD governments in reviewing options for spending

reductions has been to lower the overall public sector wage bill. There is a popular

assumption that public sector wages and benefits offer scope for cuts. However, looking at

pay scales and comparing with the private sector suggests that this is overestimated (assuming

that there is a commitment to attracting and retaining trained staff). For the first time, the

OECD has collected data on the compensation of central government employees in core

ministries, specifically for senior managers, middle managers, professionals and secretaries.

For these professions, the data show relative total remuneration across OECD countries,

including not only salaries and wages, but also social benefits and future pension earnings. On

average, senior managers‟ total compensation in responding countries amounted to just under

USD 235 000 PPP in 2009, while professionals such as economists or statisticians earned

approximately USD 90 000 PPP annually. Executive and administrative secretaries received

on average between USD 50 000 and 60 000 USD PPP. These data reveal a fairly egalitarian

pay structure in the public sector: senior managers in central government (which can be

equivalent to Deputy Ministers or Chief Executives) make 2 times the amount of policy

analysts and about 4.5 times that of the average secretary‟s compensation. Government at a

Glance 2011 also provides data on teachers‟, doctors‟ and nurses‟ wages or annual income in

relation to the average earnings of other university-educated professions in the labour market.

These suggest that lowering wages further would risk making key public sector occupations

highly uncompetitive.12

12

See OECD (2011), Government at a Glance, Chapter VI.

12

0

1

2

3

Top manager (D2) Middle manager (D3) Economist / Policy analyst

OECD14 OECD16 OECD19

Operational expenditure: not much slack in terms of compensation for civil servants...

OECD average annual wages for select positions in central/federal govt relative to average tertiary educated wage in the labour market

(2009)

Below University graduates’

average earnings

Above University graduates’

average earnings

0

1

2

Above University graduates’

average earnings

Below University graduates’

average earnings

Source: OECD (2010) Education at a Glance; Government at a Glance 2011.

In the majority of OECD countries, teachers make below the average tertiary graduate’s earnings, despite 15

years of teaching experience (2008)

Operational expenditure: not much slack in terms of compensation...

13

Relief on the horizon as baby-boomers retire

Percentage of civil servants aged 50 or over relative to labour force (2010)

Source: Government at a Glance 2011, OECD 2010 HRM Survey and ILO.

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Ita

ly

Ice

lan

d

Swe

den

Be

lgiu

m

Ge

rman

y

Un

ite

d S

tate

s

De

nm

ark

Slo

vak

Re

pu

blic

Gre

ece

Isra

el

No

rway

Fin

lan

d

Ne

the

rla

nd

s

Ca

nad

a

Ire

lan

d

Au

stri

a

Hu

nga

ry

Po

rtu

gal

Swit

zerl

an

d

Un

ite

d K

ingd

om

Fra

nce

Ne

w Z

ea

lan

d

Slo

ven

ia

Po

lan

d

Mex

ico

Au

stra

lia

Jap

an

Esto

nia

Ch

ile

Ko

rea

OEC

D a

vg

EU a

vg

2000 2009

%

A key misconception that the data seems to disprove is that there is a „right size‟ of the

public service workforce. There are large differences in the share of government employment

among member countries, reflecting different choices with regard to the scope, level and

delivery of public services. The proportion varies from 6.7% in Japan and 7.9% in Greece to

nearly 30% in Norway and Denmark. While it would be perhaps expected that Nordic states

have large public sector workforces, both Japan and Greece would also be probably thought

of as countries with “heavy” bureaucracies. Public sector performance and service quality do

not seem to be determined by workforce size, with countries viewed as being at the forefront

of public management situated at both ends of the public employment spectrum.

Recent discussions at the OECD Public Employment Network have focused on how

governments should downsize in cases in which for fiscal reasons a large reduction in budgets

makes staff cuts inevitable. Based largely on past experience, the conclusion of practitioners

tends towards a cautious approach. If undertaken, downsizing should be part of the broader

strategy to improve efficiency and service delivery; that strategy should include measures to

safeguard morale, trust and capacity. In particular:

Large scale downsizing is the most problematic option for workforce adjustment.

Assessments have highlighted a variety of negative effects on the capacity of the workforce as

well as on trust and morale, and questioned the longer term sustainability of staff reductions

achieved in this way. Citizens could also lose trust if downsizing undermines the continuity of

services. Large scale reductions involve privatisation of government activities, outsourcing of

activities to the private sector, and corporatisation of activities and even the transfer of

responsibilities to sub-national levels of government and shifting activities into arm‟s-length

agencies of central government, principally in the 1990‟s in New Zealand and the United

Kingdom. All of these are likely to reduce staff performance, and place continuity of service

14

and the reputation of the public service in jeopardy. For example, in Australia in the 1990s,

large scale staff reductions were assessed to have had negative effects on the surviving labour

force in terms of morale and loss of expertise.

Recruitment freezes are the most detrimental approach to downsizing because they are

indiscriminate and limit the ability of organisations to restructure and reskill. Moreover, as

they tend to be protracted, the negative impact on the morale of staff and managers and on the

capacity to deliver services is likely to be significant. Some countries conducting partial or

total recruitment freezes are: Austria, France, Greece, Ireland, Italy, Japan, Spain and Portugal

(see previous slide for more concrete examples).

Redeployment arrangements in the context of staff reductions can help retain skills and

experience, and moreover help manage the industrial relations aspects of downsizing. More

needs to be done also to break down barriers to redeployment and mobility, in order to

support the restructuring of services and optimal use of skills. At the same time, the current

pressures offer the opportunity to renegotiate work practices in order to increase flexibility,

thereby laying the basis for improvements in efficiency and service delivery.

OECD countries appear to be continuing with reforms aimed at improving the

productivity and capacity of the public service even while implementing cutbacks, this is a

very difficult balance to achieve. The main risk is that the focus will shift to seeing staff as

costs rather than as assets. Compensation for public servants is often portrayed in the media

as the main source of inflated public budgets. However OECD data suggest that wage bills in

the public sector have grown rather slowly. Other budget items have grown much more

rapidly, among them outsourcing.

90

100

110

120

130

140

150

160

170

Ind

ex,

bas

e ye

ar

19

95

= 1

00

Outsourcing expenditures have grown at a faster rate than spending on compensation for

government employees.(OECD average)

Source: Government at a Glance 2011; OECD System of National Accounts.

Outsourcing

Compensation of employees

Data suggest other potential cost drivers

Source: Government at a Glance 2011, OECD National Accounts Statistics

15

Achieving a path to fiscal sustainability requires an agreement among citizens, businesses

and governments about what level of services the public wants governments to provide and to

what extent the public is willing to pay for those services. A Financial Times Op-Ed piece in

August 2011 described the fundamental challenge for Western governments as being to

convince citizens to accept less from government in terms of goods and services than they

have been used to. Governments have been quick to underline that spending cuts should aim

to improve supply-side efficiency in the economy, thereby generating growth, and enhance

the quality of service provision, thereby minimizing the negative impact of spending

reductions on citizens and businesses.

Identifying how policies and procedures could be improved, duplication and waste,

reduced, and other actors brought into the policy process is a huge task – a comprehensive

review of the way the public sector operates. The problem is that this effort is taking place in

parallel with cost cutting that inevitably withdraws front-line public services and personnel.

From a management perspective, it is challenging to promote an agenda of innovation and

reform to a workforce affected by wage freezes, enforced redundancies, workload increases

due to non-replacement of staff, and so on. Maintaining morale and providing incentives in

the public sector is crucial to the success of the overall reform project.

Finally, it is important to remind ourselves that surveys to explore the key attributes

expected of the public sector tend to find that citizens value integrity-related qualities more

highly than those relating to performance and efficiency.13

13

A full discussion of this issue can be found in Michiel S. De Vries and Pan Suk Kim (eds.) (2012), Value and

Virtue in Public Administration.

16

Public service values remain the underlying basis

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Per

cen

tage

of

the

29

co

un

trie

s th

at r

esp

on

ded

to

bo

th t

he

20

00

an

d

20

09

su

rvey

s

2000 2009

Source: OECD Government at a Glance 2009

Innovation in service delivery: improving impact while reducing the burden on the public

sector

Increased budgetary pressures and highly diversified demands from citizens and service

users have made innovation an imperative to maintain high quality public services. Innovative

approaches and solutions are the only way to foster public sector performance and enable

greater productivity at no additional cost.

Despite this increasing focus on innovation, knowledge of how countries have gone

about promoting and implementing innovative policies and practices is fragmented. Few

countries have defined comprehensive policies to foster innovation across the public sector.

Even fewer seem to have developed business case methodologies to examine the impact of

innovative practices on public organisation performance. A systemic approach to innovation,

looking at the enabling factors as well as the barriers, will be necessary to help lead change

processes in public policymaking.

Countries have begun to introduce innovative practices, however knowledge and analysis

remains limited and fragmented. Developing knowledge of what creates successful

innovations depends on a systematic approach where the mechanics of change and its

enabling factors are understood, alongside an understanding of the particular challenges faced

by the public sector, and the needs and preferences of its users. OECD is developing an

analytical tool for governments to assess new policies and instruments: the OECD

Observatory of Public Sector Innovation. This repository of new ideas and approaches will

collect and categorise innovations and help governments identify good practices for their

situation.

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In the general area of public sector innovation, OECD work is highlighting the

accelerating trend towards new forms of public service delivery. While outsourcing and

public-private partnerships have been around for a long time, the emergence of co-production

is newer and is now an area of research and policy experimentation for many OECD

countries. Volunteer community groups partnering with local police to increase safety in their

neighbourhoods; patients with chronic illnesses taking control over their health with the

support of health-care professionals; young parents using online social networks supported by

social workers to get guidance and share advice regarding their children's upbringing. These

are all examples of user-centred collaborative approaches in service delivery (also referred to

as "co-production" ) where citizens or service users design, commission, deliver or evaluate a

public service in partnership with service professionals. In co-production, because at times

users may take responsibility over the initiative for service development, the line between

service delivery and policy making can be sometimes blurred.

In a time of increased budgetary pressure and growing demand for public services, these

approaches can be a source of innovation leading to greater individual and community

empowerment, increased user satisfaction and reduced production costs. The results of an

OECD survey on service delivery indicate that for the majority of OECD countries that have

adopted some forms of co-production, the objectives being primarily to increase the

involvement of citizens and achieve better quality service delivery (60%) rather than to reduce

costs (23%).14

However, despite an increased focus by OECD countries on user-centricity, co-

production as a form of service delivery remains developmental. Indeed, the majority of

member countries have some experiences of co-production in one or more public service

categories, but only a few (e.g. Canada, Norway, the United States, Finland, and the United

Kingdom) have gone beyond piloting this approach to embed these schemes in the delivery of

some public services.

Governments face several barriers to adopting co-production as a means of service

delivery. A shortage of resources (42%), organisational resistance to change (36%), and lack

of financial incentives (31%) are the most frequent obstacles identified by government

officials. Additionally, there is still limited understanding and measurement by governments

of the benefits and costs of co-production schemes, as also reflected by the scarce

development of standardised business cases; 29% of respondents from OECD countries

reported that they lacked evidence of the potential benefits of co-production.

Reasons for promoting co-production

14

For a full discussion of co-production initiatives in OECD countries, see OECD (2012) Together for Better

Public Services.

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Source:

Monitoring new practices and innovations will help to demonstrate progress that

governments are making in trying to address the pressures brought by fiscal constraints and

low growth. Their ability to promote major reforms of the public sector and of the services it

provides will be crucial in helping to return countries to a path of more inclusive growth.

23% 35%

48% 55% 60%

71%

0% 10% 20% 30% 40% 50% 60% 70% 80%

To cut budget expenditures and

costs

To increase productivity

To build citizens' trust and

confidence in government

To improve effectiveness, outcomes and

achieve greater value for money

To improve service quality

To increase the involvement of users or citizens

% of all respondents for all service categories

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The next step: assessing quality of outputs

As discussed above, we have made significant progress in developing comparative data

to support analysis of the fiscal challenge facing OECD countries, the scope and nature of

efforts to reduce expenditures and increase revenues, the sectors that are being hardest hit by

budget cuts, and many other things. But what will be the affect of these cuts on the quality of

services? Will deteriorations impact trust in governments? Governments who are able to

reduce expenditures while maintaining quality in service delivery will be true examples to

follow; demonstrating gains in efficiency.

Indeed, the issue of the impact of the cuts on people‟s lives (and on the productive

capacity of nations) has not yet been fully explored. More educated, well-informed citizens

are judging governments on their performance – an important aspect of which is service

quality. In response to these demands, countries are focusing on making services as

accessible and responsive to as wide a range of citizens as possible. The quality of public

services is key to meeting government goals for effectiveness, equity and responsiveness to

citizen needs. It is also (one) key factor towards improving citizens‟ perceptions of

government (e.g. satisfaction with and confidence in).

Service quality can also be viewed as an important outcome measure of public

management practices. Achieving better quality (e.g. broader and more targeted service

coverage) while simultaneously reducing costs is particularly challenging in times of austerity

and a true test for public managers. Governments who succeed are those able of innovating

new ways of delivering services and implementing successful reforms. Indeed, tracking

improvements in quality over time can help identify the effects of those innovations and

reforms.

Lastly, indicators of quality complement international efforts to develop better measures

of public sector productivity and efficiency by adjusting outputs for quality.

There is no single definition of service quality, and countries and researchers have taken

different approaches to measurement. The main issue that first needed to be addressed was

whether there existed a common set of quality dimensions that could be applied universally

across different public services. After much discussion in working groups and research

projects, the following emerged as a framework on which there was a general consensus.

Potential framework for measuring service quality Dimensions of quality Description (“sub-dimensions”)

1. Access Geographic proximity to the service location to customer and/or

accessibility in terms of transport;

Accessibility of service/service location by those with disabilities/physical

or mental impairments;

Accessibility in terms of the distribution channels available (e.g. in person,

phone, mobile app, email, online portal, etc.)

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Accessibility in terms of time (e.g. operating hours are convenient to

customers);

Affordability- not only in terms of the cost of the service in relations to the

customers‟ economic means but also taking into consideration any

associated costs of accessing the service (travel costs, advisory costs, etc.).

Accessibility for additional kinds of divides (e.g. gender, language, socio-

economic, etc.)

Frequency with which a user must apply/re-apply to receive service and/or

demonstrate eligibility.

2. Responsiveness “Match” of service to users‟ specific needs and flexibility of

goods/services;

Speed and timeliness of delivery (e.g. response/waiting time);

Customer service in terms of empathy and courtesy;

Convenience (e.g. pre-filling of information when possible, reduction of

paperwork and procedures);

Recovery options available (e.g. for complaints, suggestions, appeals).

3. Reliability Competence of staff providing service;

Accuracy (Size of improper payments, incidences of mistakes, etc.)

Functionality- service does what is intended in a complete way; “tangibles”

(e.g. facilities, and other distribution channels work as expected);

Consistency across users (fairness);

Security (confidential information is kept secure, personal safety of

customer);

4. Communication Availability of information (also in terms of different languages..);

Number of communication channels available/used;

Clarity and completeness of information provided;

Opportunities for 2-way feedback between service providers and customers.

This framework has been reflected in the draft table of contents for Government at a

Glance 2013, where, rather than presenting indicators according to sectors as in the 2011

edition, indicators for different sectors could be organised around the different dimensions of

quality identified. It is thought also that this approach could lend itself better to the (future)

development of composite indicators for each of these dimensions, with the ultimate long-

term goal of developing a single composite indicator on “Serving Citizens” which combines

dimensions of quality from several sectors. The development of composites however, rests

first on both (i) attaining data for a greater sample of services/sectors; as well as (ii) attaining

broader set of indicators for each of the dimensions (e.g. for example with the case of access,

focusing not solely on financial access but also geographical access, etc.).

Another important element of these emerging directions in measuring govt performance

is a focus on citizen‟s views/satisfaction. Looking at perception data has been neglected

before now, riddled with methodological problems, but experienced a revival now as evident

in Stiglitz Report and the OECD”s Better Life Index (How‟s life publication). Even so these

are not a substitute but rather should complement other indicators.

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The success of this initiative will make an important contribution to understand whether

countries are emerging from the crisis stronger and more efficient.

Conclusions

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