Can public services adapt to the internet revolution
Wanted: tough bosses
Public institutions cannot hope to improve without first-class management By Paul Constance
June 16, 2002
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Shareholders are willing to offer extravagant compensation packages and near-dictatorial powers to such managers. They do so on the assumption that large organisations cannot and will not reform themselves without a strong leader who has concrete goals and the experience needed to attain them.
Rosana Costa, a management expert at the Instituto Libertad y Desarrollo, a Chilean think tank, says those attributes are even more important in the public sector.
“Employees in the public sector are never going to have the natural [compensation-based] incentives to good performance that exist in the private sector,” she says. “As a result, it is absolutely essential in the public sector to have bosses who can compel efficiency and good performance from the top down.”
And yet, Latin America’s public services are almost never run by this kind of manager. With very few exceptions, these posts are doled out as prizes by the party in power, regardless of the professional qualifications and experience of the recipient. It is not unusual to see a lawyer heading the ministry of agriculture or an architect in charge of social services-so long as both are close friends of the president.
Even countries that are attempting to professionalise public sector management have a hard time attracting and retaining talented managers. Part of the problem is the severe limitations most governments have in what they can pay.
In the United States, for example, the head of the Internal Revenue Service, which has more than 100,000 employees and collects more than a trillion dollars in taxes annually, earns less than $150,000 per year. An executive with comparable responsibilities at a typical U.S. corporation might easily earn 100 times as much, including stock options and other perquisites.
Then there are the unique pressures of high-profile public sector jobs, which invite a kind of media attention and political lobbying that most private sector executives never have to deal with. Public sector managers must also deal with labour laws and regulations that can make it extremely difficult to implement significant changes.
“Being an executive in the Chilean public sector is just like being an executive in a private company,” says Mario Waissbluth, executive director of Invertec IGT, a Chilean management consulting firm, “except that one of your hands is tied behind your back, you’re barefoot, you’re paid a lot less and you have to carry an enormous backpack.”
The price of excellence
Not necessarily so, says Javier Etcheberry, a former professor and private sector executive who has run the Chilean Internal Revenue Service since 1990.
Etcheberry took the job with the understanding that he would be given full discretion in picking his upper managers. In addition to hiring a headhunting firm to recruit the best possible executives, Etcheberry lobbied Chile’s Congress for permission to pay special performance bonuses that have narrowed the earnings gap between his managers and their private-sector counterparts to around 30 per cent.
Surprisingly, the powerful tax service auditors union agreed to the bonus.
“They agreed as part of a negotiation in which both sides made concessions,” Etcheberry says. “But this speaks well of them, because it shows that they understand that for this service to keep improving, we need good bosses with good pay.”
Yet, decent salaries, in and of themselves, will never be enough to compensate executives for the pressures and frustrations associated with running a large public enterprise. Genuine altruism and a strong sense of vocation are ultimately essential in such jobs. Only governments that place commitment, experience and dedication above political considerations are able to attract candidates with these qualities.
Chile provides an impressive example of the dividends that such an approach can pay. Etcheberry, for example, has been reappointed to head the SII by three consecutive governments. The last two apparently valued his performance record more than the chance to award his post as a political prize. And Alejandra Sepúlveda, rose through the ranks of the Civil Registry for seven years before she was named director. Earlier this year, she also was reappointed by an incoming president.