WORLD BANK TECHNICAL PAPER NO. 506 Wrk In prore WTP506 for pubilo diousalon May 2001 Institutional Environment and Public Officials' Performance in Guyana |~~~~~ ~~~~ C-1 | | Omer Gokcekus Nick Manning Ranjana Mukherjee Raj Nallari Recent World Bank Technical Papers No. 421 Gert Jan Bom, Robert Foster, Ebel Dijkstra, and Marja Tummers, Evaporative Air-Conditioning: Applications for Environmentally Friendly Cooling No. 422 Peter Quaak, Harrie Knoef, and Huber Stassen, Energyfrom Biomass: A Review of Combustion and Gasifica- tion Technologies No. 423 Energy Sector Unit, Europe and Central Asia Region, World Bank, Non-Payment in the Electricity Sector in Eastern Europe and the Former Soviet Union No. 424 Jaffee, ed., Southern African Agribusiness: Gaining through Regional Collaboration No. 425 Mohan, ed., Bibliography of Publications: Africa Region, 1993-98 No. 426 Rushbrook and Pugh, Solid Waste Landfills in Middle- and Lower-Income Countries: A Technical Guide to Planning, Design, and Operation No. 427 Marinio and Kemper, Institutional Frameworks in Successful Water Markets: Brazil, Spain, and Colorado, USA No. 428 C. 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All rights reserved Manufactured in the United States of America First printing May 2001 1 2 3 4 04 03 02 01 Technical Papers are published to communicate the results of the Bank's work to the development community with the least possible delay. The typescript of this paper therefore has not been prepared in accordance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibility for errors. Some sources cited in this paper may be informal documents that are not readily available. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. 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For permission to reprint individual articles or chapters, please fax your request with complete information to the Republication Department, Copyright Clearance Center, fax 978-750-4470. All other queries on rights and licenses should be addressed to the World Bank at the address above or faxed to 202-522-2422. ISBN: 0-8213-4946-5 ISSN: 0253-7494 Omer Gokcekus is a consultant to the Poverty Reduction and Economic Management Public Sector Management Division of the World Bank. Nick Manning is a public sector management specialist for the Poverty Reduction and Economic Management Public Sector Management Division of the World Bank. Ranjana Mukherjee is a consultant to the Poverty Reduction and Economic Management Public Sector Management Division of the World Bank. Raj Nallari is a senior country economist for the Caribbean Country Management unit of the World Bank. Library of Congress Cataloging-in-Publication Data has been applied for. Contents Foreword ................................................... vi Abstract ................................................... vii Abstract ................................................... vii Acknowledgments ................................................... viii Abbreviations ................................................... ix Introduction .................................................... 1 1. Profile of public employment ....................................................3 Background ...................................................3 Composition of the public sector ...........3........................................3 Personnel management responsibilities in the public sector ...........................................4 Public sector reform during the nineties ................ ...................................5 Shape and size of public employment ...................................................S5 Fiscal weight ...................................................8 2. The survey of public officials in Guyana ................................................... 10 Why were public officials surveyed? ................................................... 10 Survey design ................................................... 11 Sampling features ................................................... 1 1 Survey administration ................................................... 12 3. Survey findings ................................................... 14 4. Looking for points of entry: the impact of institutional environment on performance 21 The model used for analyzing WBNPP surveys ................................................. .. 21 Measuring the institutional environment ................................................... 22 Implications for organizations ................................................... 25 Measuring performance ................................................... 27 The connection between performance and institutional environment ........................... 29 Where are the opportunities for reforms? ................................................... 30 Performance pay-offs (PPOs) ................................................... 31 5. Implications for interventions ................................................... 35 Appendices ................................................................ 39 Appendix 1 Details of public sector organizations ....................................... ................ 39 Appendix 2 Questions behind the prior assertions ........................................................ 41 Appendix 3 Institutional environment indicators .......................................................... 48 Appendix 4 Performance indicators .................................. .............................. 60 Appendix 5 Connection of performance and institutional environment .......... ............. 67 Appendix 6 Econometric and analytical issues ............................................................. 70 Tables in Text 1 Salary bands and employees .7 2 Trends in personnel expenditure .9 3 Key dimensions probed in the survey .11 4 Common assertions tested .14 5 Institutional environment in different organizations .27 Figures in Text 1 Composition of Guyanese public sector by type of organization .3 2 Employment in Guyanese civilian government excluding police .6 3 Structure of executive government in Guyana .8 4 Distribution of the sample among kinds of tasks performed by .12 5 Distribution of the sample among kinds of organizations .12 6 Reasons why officials joined the public sector .15 7 Ways in which officials supplement salaries .15 8 How do officials rate the quality of lives they lead? .15 9 Levels in the public sector from which most exits take place .15 10 Education levels of surveyed officials ............................................................... 16 11 Part of the formal training ................................................................ 16 12 Officials who were assured of obtaining their jobs even before they applied .......... 17 13 Officials who were recruited on the basis of written examination ............................ 17 14 Officials' perceptions of whether politicians' interference is a significant problem. 18 15 Officials' perceptions of whether politically well-connected colleagues are treated better ................................................................ 18 16 Intervention that can contribute most to improving organizations' performance ..... 19 17 Analytical model for WBNPP-funded surveys ......................................................... 21 18 Construction of indicators for institutional environment .................. ........................ 23 19 Institutional environment of the Office of Auditor General and the Ministry of Works and Communication ................................................................ 25 20 Construction of indicators for performance in Guyana ............................................. 28 21 The relationship between institutional environment and performance in fifteen public sector organizations of Guyana ................................................................ 30 22 Maximum impact of reforms on results-focus and accountability in Guyana .......... 32 23 Range of impact on results focus .................................. .............................. 33 24 Range of impacts on accountability .................................................. .............. 34 iv Tables in Appendices A 1 List of ministries ............................................................. 39 A 2 Lists of semi-autonomous agencies ....................................... ...................... 39 A 3 List of constitutional agencies ......... ................................................... 39 A 4 List of public corporations ............................................................ 40 A 5 List of regions ............................................................ 40 A 6 Grades and pay scales ............................................................ 40 A 7 Questions used for calculating rule credibility in Guyana ....................................... 50 A 8 Rule credibility indicator and its components in Guyana ........................................ 51 A 9 Questions used for calculating policy credibility in Guyana ................................... 52 A 10 Policy credibility indicator and its components in Guyana ................. .................... 53 A 11 Questions used for calculating resource adequacy and predictability in Guyana ... 54 A 12 Indicator of institutional environment and its components in Guyana .................... 55 A 13 Institutional Environment in Guyana (standardized) ............................................... 56 A 14 Questions used for calculating results focus in Guyana ..................... ..................... 60 A 15 Indicator of results focus and its components in Guyana ................... ..................... 61 A 16 Questions used to calculate accountability indicator in Guyana ............. ................ 62 A 17 Accountability indicator and its components in Guyana ......................................... 63 A 18 Questions used for calculating employee morale in Guyana ................................... 64 A 19 Employee morale indicator and its components in Guyana ................ .................... 65 A 20 Indicator of performance and its components in Guyana .................... .................... 66 A 21 Correlation coefficients for the (converted) institutional environment indicators for Guyana .................................................................... 71 A 22 SURE estimation results for the Guyana's public sector ......................................... 73 A 23 Mechanics of calculating the PPOs ................................... ......................... 74 Figures in Appendices A 1 Eight dimensions of the institutional environment in the public sector of Guyana .57 A 2 Institutional environment in the Ministry of Works and Communication ......... ...... 58 A 3 Institutional environment in the Office of the Auditor General ............................... 59 A 4 The relationship between institutional environment and results-focus in Guyana.. 67 A 5 The relationship between institutional environment and accountability in Guyana 68 A 6 The relationship between institutional environment and employee morale in Guyana ............................................................ 69 v Foreword Recognizing that strong institutions are an integral part of a well-performing public sector, this paper is part of a larger effort in the Poverty Reduction and Economic Management Network to develop practical strategies for reform. The objective is to present results to policymakers in a format that leads to more informed choices about the public sector. This study is based on the findings of surveys of public officials in Guyana. Funding for this and fifteen other country-studies came from the Bank-Netherlands Partnership Program. The report emphasizes that public officials respond to their environment. They are neither intrinsically selfless nor intrinsically rapacious, and their behavior must be understood in the context of the incentive structure that they face. The approach has been to start with the existing knowledge about the country's public sector and then use officials' responses to deepen understanding of strengths and weaknesses of the public sector institutional environment. The report sets out the key lessons from the survey that will encourage debate on priorities for reform, and which institutions might be further strengthened and how. Cheryl W. Gray Director, Public Sector Group Poverty Reduction and Economic Management Network vi Abstract This report presents the findings of a survey of 454 public officials in Guyana, whose views were sought on a wide range of civil service issues-from personnel management practices to rewards and disciplinary actions, and from budget environment to corruption. Respondents' answers were used to test some prior assertions about the public sector in Guyana. Respondents believe that public sector jobs are attractive, but public employees are not fully prepared for their jobs through education and training and that recruitment is not always based on merit. Officials find policies consistent, and implement policies even when they disagree with the policy direction. Decision-making is, however, characterized by poor communication and low employee participation. Surveyed officials show keen insight about which reforms might enhance the performance of the organizations in which they work. Utilizing the analytical framework developed for the series of WBNPP- financed public officials surveys, data analysis enables quantification of how public officials assess the institutional environment and performance of their organizations. Survey data was analyzed to demonstrate how widely varied the institutional environments of different public sector organizations can be. Across the sampled public sector organizations, survey data provides evidence that performance does depend upon institutional environment. The report explores how interventions can be prioritized according to their potential payoffs in different performance areas. Setting goals and monitoring performance is likely to be associated with the most significant positive change in performance. vii Acknowledgments This report is a product of the Public Sector Group in the PREM network. It analyzes the findings from a survey of public officials in Guyana undertaken between November 1999 and January 2000. The survey is one of a major program of surveys of public officials funded by the Bank Netherlands Partnership Program (BNPP). The survey was designed by Omer Gokcekus (PRMPS) and Ranjana Mukherjee (PRMPS), administered by the Management Services Division of the Public Service Management Ministry, and coordinated by Leila Parris, Deputy Permanent Secretary, Public Service Management Ministry, Government of Guyana. The report was prepared in the Public Sector Group of the PREM network with input from Leila Parris and Grace MacCalman of Public Service Management Ministry, Government of Guyana. Adeel Malik (PRMPS) provided research assistance. The authors thank Ethan Weisman (IMF) and Dr. Roger Luncheon, Head of President's Secretariat, Government of Guyana for their comments on earlier drafts of the report. The document was peer reviewed by Monica Das Gupta (DECRG) and Jit Gill (LCSPS), and their comments are gratefully acknowledged. The authors also thank those who participated in an Internet discussion of the report in January and February 2001. The views expressed in this report are not necessarily those of the World Bank. viii Abbreviations BNPP Bank Netherlands Partnership Program CA Constitutional Agencies CIDA Canadian International Development Agency CXC Caribbean Examinations Council DFID Department for International Development ERP Economic Recovery Program GCE General Certificate of Education GDP Gross Domestic Product GUYSUCO Guyana Sugar Company HIPC Heavily Indebted Poor Country IDA International Development Administration IDB Inter-American Development Bank IMF International Monetary Fund LDO Local Democratic Organs PC Policy Credibility PPO Performance Pay-Offs PS Permanent Secretary PSC Public Service Commission PSM Public Service Management RA Regional Administration RC Rule Credibility RP Resource Adequacy and Predictability SAA Semi-Autonomous Agencies TC Technical Cooperation UNDP United Nations Development Programme USAID United States Agency for International Development ix Introduction This report analyzes the findings from a survey of public officials in Guyana undertaken in 1999. The immediate objective was to use detailed survey data to map the points of strength and weakness in the Guyanese public sector. The aim of the study was to draw conclusions about those institutional weaknesses that should be the immediate target for reform. The premise for the survey design and data analysis is that public officials' performance depends on their institutional environment, and that understanding the formal rules is necessary but insufficient to understand the reality that officials face. Formal rules do matter, but public officials' actions are also shaped by the degree to which they believe that rules will be enforced in practice, that resources will be provided as promised, and that policies are stable and implementable. This survey set out to obtain a better understanding of where and why formal rules are not applied, and what informal incentives constitute working reality for officials. The survey begins with questions about the background, current position, and future plans of respondents. This first section includes questions regarding the age, gender, marital status, education, salary, training, number of subordinates, and work experience of officials. A second set of questions deals with officials' reasons for working in the government, factors contributing to poor performance, general hiring trends, existence and efficacy of formal training, frequency of performance appraisal, existence of performance standards in the organization, records management systems, evaluation of disciplinary actions, and evaluation of employee rewards. The next set of survey questions explores budget management, covering the extent of officials' involvement in budget preparation, estimate of budgetary shortfall, areas of budgetary cuts, expenditures in excess of budgetary authorization, and the penalties associated with those expenditures. A subsequent set of questions focuses on organizational mission- consistency of policies, views on improvement of organizational performance, and the frequency of political interference in the organization. The final set of questions examines the significance of corruption as a problem, the location and forms of corruption, the regularity with which instances of corruption are reported, and measures to help reduce corruption. The survey provides the opportunity to test empirically a series of commonly-held assertions about the civil service in Guyana. This "common knowledge" includes assertions about decision-making in the public sector, incentives for good performance by public officials, the popularity of public sector jobs and public employees' preparation and training for the jobs they do. The survey finds that most respondents maintain the view that public sector jobs are attractive. It shows that public employees are not fully prepared for their jobs through education and training and that recruitment is not always based on merit. The survey does offer the reassuring finding that officials find policies consistent, and implement policies even when they disagree with the policy direction. Decision-making in the public sector is, however, characterized by poor communication and low employee participation. Surveyed officials show keen insight about which 1 reforms might enhance the performance of the organizations in which they work. They reported that increased funds would not necessarily make their organizations perform more effectively; performance evaluation and monitoring, officials stated, are more essential. The survey also allows some associations to be identified between specific elements of institutional environment and officials' performance. The survey employs a particular empirical approach which moves beyond theory into a practical investigation of which institutions matter particularly and where the largest "performance pay-offs" might be found. The intention of this approach is to move beyond the general finding that institutions matter for performance, and to open up consideration of which institutions matter particularly. This report is divided into five sections: Section I draws an outline of the public sector in Guyana, highlighting pay and employment in the civil service. This section sets the background against which the survey was conducted. Section 2 summarizes the survey instrument, sample details and the survey implementation methodology. Section 3 presents the findings from the surveys. Prior assertions about Guyana's public sector performance are tested from survey results. Section 4 analyzes survey data to establish the connection between officials' performance and their institutional environment. In that section, the components of institutional environment and performance are enumerated, institutional environment and performance are measured in termns of indicators, and then connections between the institutional environment and performance and pay-offs on potential reform interventions are explored. Section 5 summarizes the reform implications of the main findings of the survey. Unless otherwise stated, figures and charts are based on author calculations of survey data. 2 1. Profile of public employment Background Guyana is a heavily indebted poor country (HIPC) with a population of 750,000 people. A former British Colony, Guyana achieved independence in 1966. Four years later, it became a Cooperative Republic within the British Commonwealth following centralized socialist policies. In 1980 a new constitution was enacted, declaring Guyana an indivisible, secular, democratic, sovereign state. The policies pursued by the government of Guyana in the 1970s and 80s were characterized as "cooperative socialism." The productive sectors were predominantly controlled by the state. Since 1988, however, the Economic Recovery Program (ERP) has reversed most of those financial and industrial policies begun in the 1970s. Composition of the public sector The public sector in Guyana is composed of ministries (and divisions and departments under them), regional administrations, public corporations, financial entities, constitutional agencies, and military and police services. Figure 1 Composition of Guyanese public sector by type of organization Public sector| pubTic regional ministhes public constitutaonal meitiary and corporations administrations financial agencies police corporations t p asions r tautonomous l l | ~~departments| semi-autonomous) Iagencies I The ministries are listed in Appendix 1. Although most divisions and departments report oteto the minister through their respective hierarchies, some ministfies contain autonomous departments whose heads report to the minister directly. For example, the Ministry of Finance contains the Inland Revenue and Customs and Excise departments which have this particular status. Semi-Autonomous Agencies (SAAs) are intermnediate in character between government departments and public corporations. These are controlled by a supervisory board, and report directly to the sector minister. Within the public sector, the Constitution establishes a number of Constitutional Agencies (CAs), which have specific functions to ensure 3 probity in the conduct of public affairs. A significant component of the public sector in Guyana consists of public corporations, governed under the Public Corporations Act of 1988. Appendix 1 lists all Guyanese public sector organizations. The Local Democratic Organs (LDOs) Act, passed in 1980, added another administrative layer. The effort was intended to decentralize government powers with the creation of 10 regions, with their respective Regional Administrations (RAs) and Regional Democratic Councils (RDCs), including 6 town municipalities, 19 district councils, 32 village councils, and 75 Amerindian councils. RAs were established to incorporate popular participation while managing within the general policies of the central government. The current debate on constitutional reforms may lead to future changes in these arrangements. Personnel management responsibilities in the public sector The Constitution of Guyana sets out the legal framework for the functioning of the state. Under the Constitution, the president has complete authority over the structure of the government and its ministries. The ministries are structured into a number of divisions, which are the direct responsibility of the Permanent Secretary (PS). The composition and functions of the Public Service Commission (PSC) are set out in articles 200 to 205 of the Constitution. The Public Service Commission rules (1998) specify the regulations for appointments, promotions, transfers, retirement, discipline, conduct, and related personnel management issues. The Commission delegates, with due approval of the prime minister, the administrative powers to a permanent secretary, head of department or the clerk of the National Assembly.I The head of the Public Service serves as the head of the Presidential Secretariat, as the cabinet secretary, and as the senior public servant in the Office of the President, which now contains the Department of Public Service Management (PSM), the former Public Service Ministry, which has its own permanent secretary. The responsibility for personnel policy and administration is divided between the Public Service Commission and the Public Service Management (PSM) Ministry, individual ministries, Regional Administrations (RAs), and, for payroll purposes, the Ministry of Finance. The PSM is responsible for all personnel policies in the public service. Its responsibilities include determining the number of posts in the ministries, establishing salary and grading levels, and developing training programs. The individual ministries and RAs are responsible for day-to-day management of staff, their training and appraisal, and for maintaining employment and salaries within limits approved by the PSM. Overall, human resource management remains highly centralized and RAs and individual ministries have little delegated authority.2 1 Government of Guyana (1999). 2 This section draws on the World Bank (1993 and 1999b). 4 Public sector reform during the nineties During the 1990s, the government of Guyana undertook a major-public sector reform initiative with the active support of IDA, IDB, British DFID, CIDA, UNDP, and USAID. Public sector reforms have been politically difficult and slow in implementation. With IDA support, private management (Booker Tate, Ltd. of the UK) was introduced in the Guyana Sugar Company (GUYSUCO) in the early 1990s. Since then, with support from IDA's ongoing public administration project (1993-1999) and IDB projects, the government since the late-nineties has: (1) Streamlined the grade structure and carried out a private sector survey to fine-tune a new remuneration structure that is conducive to retaining and attracting managerial, professional and technical personnel. But the large wage awards by the tribunal for 1999- 2000 precluded a separate wage structure as originally intended; and (2) Revised public service rules relating to employee discipline, severance, and annual performance appraisals; and (3) Completed the restructuring of the finance ministry and started the restructuring of the Ministry of Education and the Ministry of Health. Because of continued opposition from the unions, the government has been slow in reducing the size of the civil service. The government, with support from IDA, has improved the payroll and pensions database. Ongoing 1DB technical cooperation is supporting the government in staff audits, job descriptions, and performance appraisal, which will serve as key inputs for the public sector modernization program to be implemented over the medium term. Shape and size of public employment During the 1990s, public employment in civilian government (excluding police) has fallen significantly. Since 1993, the number of employees has dropped from 56,000 to about 31,000, and total public employment in Guyana today accounts for 13 percent of the labor force.3 Government is also continuing a hiring freeze, begun in October 1999. In late October 2000, the government eliminated over 1,200 security guard positions and contracted out security services to a private firn. With the support of 1DB and IDA, the government plans to modernize the public sector over the medium term. 3 World Bank (2000a). 5 Figure 2 Employment in Guyanese civilian government excluding police 60,000 50,000 - 40,000 - 30,000 - 20,000 - 10,000 0- 93 94 95 96 97 98 - public sector - central government Source: IDA staff estimates. The public service in Guyana includes public servants working for ministries and their affiliated departments, the regional associations and constitutional agencies. Available government estimates indicate that there are 21,206 public service posts, of which 12,024 (57%) are filled and 9,182 (43%) are vacant. Of the recorded 21,206 positions, 63% are in ministries, 31% are in RAs and 6% are in CAs.4 Three-fourths of the filled positions in the public service are in the lowest 5 grade levels, and vacancies at the lower levels are due partly to a conscious effort to streamline the civil service. However, vacancies at the middle and higher levels are due mainly to the unattractiveness of civil service salaries. In 1993, a 14-band salary structure was introduced and, on the basis of job evaluations, all existing posts were incorporated into the new structure. The current level of salaries corresponding to these bands is presented in Appendix 1, and the number of employees belonging to the central public service in each band are given in the box alongside. The government of Guyana has undertaken significant efforts to improve the remuneration structures. To correct for the real wage declines in the public sector in the 1980s and early 1990s, the government first revised the salary structure in 1993 and later approved a series of wage increases beginning in 1994. Wage supplements were additionally granted over base pay to critical positions. The intention behind the government's wage reform was to achieve the medium-term goal of gradually bringing public sector wages to within 10 percent of the median for comparable jobs in the private sector.5 IDA staff estimates, 1999. IDA staff estimates, 1999. World Bank (1995). 6 Table 1 Salary bands and employees Band Number of __ Employees 0 52 1 1686 2 2841 3 879 4 1095 5 545 6 288 7 374 8 344 9 278 10 230 11 162 12 61 13 45 14 18 Note: Does not reflect Guyana police force. Source: PSM Ministry (2000). Following a two-month strike in May-June 1999, the arbitration tribunal awarded a larger-than-expected increase in public salaries. Civil service salaries were raised by 31 percent. A further 27 percent increase was granted in 2000. Though the impact of the more recent wage raise is not documented, the earlier reforms were described as only partially successful. The two government surveys commissioned in 1998 deduced that private salaries exceeded those of the public service for comparable positions.6 The wage compression in 1999 was 8:1, down from 6:1 in the early 1990s7. However, salaries are more compressed for technical and professional staff, 3.5:1 and 6.6: 1, respectively.8 The figure below shows the structure of public employment in Guyana, with available employment figures corresponding to each category. 6 Concern has been expressed that the private sector surveys were based on non-comparable groups (see Rama 1999). Wage compression is the ratio of midpoint of highest and lowest salary scales. 8 World Bank (1999b). 7 Fiscal weight Total public expenditures in Guyana amount to about 40 percent of GDP and the central government's budget deficit (after grants) stood at over 6 percent of GDP in 1999.9 The recent generalized pay rise has exerted greater fiscal pressure. In 1998 total expenditure on personnel wages of central government employees was two and a half times as much as in 1993. In the period of 1993-1998, the annual percentage increase in personnel expenditures averaged 19.5 percent. The ratio of wages and salaries to GDP has risen by more than 38 percent since 1993, compared with a 29 percent increase in the ratio of allowances and contributions to GDP in the same period. The expenditure on wages and salaries of public officials has consumed a greater proportion of tax revenues over time, from 12.6 percent in 1993 to 22.8 percent in 1998. Figure 3 Structure of executive government in Guyana Government of Guyana public employment 632,25030 public general capital budget- corporations government funded project 26,850 34,250 12,00 2,500 ~ 15 military and civilian national service government 3,250 31,000 pouice fm inistries and regionai h statutory 3, 750 d i rectorates administratison bodies 11,750 12,000 | 3,500 | teachers lL teachers l o B3,000 (2l0 health workers health workers 2,500 1 1 othe staff - other staff l source: Staff minutes from World Bank files, November 1999. Boxes with heavier borders indicate parts of the public sector from which the survey sample was drawn. 9 World Bank (2000a). 8 Table 2 Trends in personnel expenditure 1993 1994 1995 1996 1997 1998a lgggb Personnel expenditure c (% of GDP) 6.2 6.0 6.3 6.6 7.8 8.4 8.4 Wages and salaries (% of GDP) 4.5 4.5 4.8 5.1 5.9 6.5 6.2 Allowances and contributions (% of GDP) 1.7 1.5 1.5 1.5 1.9 1.9 2.2 Wages and salaries (% of total tax revenues) 12.6 15.2 15.2 15.7 19.9 22.8 NA Wages and salaries (% of non-interest expenditure) 12.8 17.7 16.4 15.8 17.8 21.4 NA Consumption expenditure in the public sector (% of GDP) 15.6 14.9 14.9 16.0 17.1 17.6 NA Gross domestic investment in the public sector (% of GDP) 19.4 11.6 16.3 19.1 18.1 14.4 NA Wages and salaries in public Enterprises (% of GDP) 14.6 13.3 12.1 11.5 13.5 12.0 NA a. Preliminary estimates. b. Budget estimates. c. Includes 'wages and salaries' and 'allowances and contributions' of central government employees only. 9 2. The survey of public officials in Guyana Why were public officials surveyed? The survey of public officials in Guyana was one of a series funded by the World Bank Netherlands Partnership Program (WBNPP).10 The need for an analytical framework emerged from the lessons of past experience in the World Bank. The Operations Evaluation Department reported that during 1980-97, only one-third of the Bank's closed civil service reform interventions had successful outcomes.11 Other reviews of the Bank's public sector reform efforts have identified shortcomings of the Bank's approach in this area, pointing out the risks of a narrow and "technocratic" view of what is needed for public sector reform, and of a reliance on "best 12 practice" models that have not been feasible in the particular country setting. The Bank's most recent strategy for reforming public institutions has identified that for the approach to be effective, "[W]e need to work with our partners to understand and address the broad range of incentives and pressures-both inside and outside of government- that affect public sector perfornance." 13 The strategy paper also points out that for the analytic work to be useful, "We need to start with a thorough understanding of what exists on the ground and emphasize 'good fit' rather than any 'one-size-fits-all' notion of best practice. And we need to work with our clients and other partners to develop and apply analytic tools effectively." Public officials, like other economic agents, generally respond to the incentive structure they face. There is ample evidence, both theoretical and empirical, to suggest that the performance of public officials is greatly determined by the institutional environment in which they find themselves. The survey approach used in Guyana recognizes that incentive systems vary across types of organizations and types of officials. The survey uncovers the sanctions and rewards that drive behavior, as seen by those who may be subjected to them-the public officials themselves. The survey covers several important areas. It provides a contextual description of the public sector, including characteristics of respondents, their reasons for joining the public sector and the duration of respondents' employment in the public sector. It offers the possibility of presenting policy-makers with robust confirmation of the theory-based assertion that it is the institutional environment-defined in a policy-relevant manner- that drives performance. The survey also allows hypotheses about the Guyanese civil '° WBNPP surveys of public officials have been completed in Albania, Argentina, Bolivia, five countries in the Organization of East Caribbean States, Guyana, Indonesia, Kenya and Moldova. Survey results are displayed on the World Bank's web site at http://wwwl.worldbank.ore/publicsector/civilservice/surveys.htm for the use of independent researchers, policy makers, practitioners, and other interested parties. World Bank (1999). 12 World Bank (2000. 13 Ibid, p.4-5. 10 service to be tested. Many widely held views on public officials are bandied about without substantive evidence-more akin to "urban myths" than to empirical observations. The survey allows such assertions to be tested and supported or refuted. Finally, with important cautions, the survey allows some assessment of which aspects of institutional environment exert a particularly strong impact on performance. Survey design The survey questionnaire was adapted from a tested template, based on focus-group interviews held with public officials in November 1999. The questions were tailored to the specific administrative environment of Guyana. The questionnaire contained 74 questions, and was divided into five main sections, and conducted in English. Some questions on sensitive issues such as corruption were contained in a separate booklet. The structure and the main focus of the questions asked are presented in Table 3 below. Table 3 Key dimensions probed in the survey Profile of the respondent General questions about the background, current position, and future plans of the respondent. Respondents were queried about their age, gender, marital status, education, salary, training, number of sub- ordinates, length of experience etc. Personnel management Reasons for working in the government; factors contributing to poor practices performance; general hiring trends; existence and efficacy of formal training; frequency of performance appraisal; existence of performance standards in the organization; records management system; evaluation of disciplinary actions; evaluation of employee rewards, etc. Budget management Extent of involvement in budget preparation; estimate of budgetary shortfall; areas of budgetary cuts; expenditures in excess of budgetary authorization and the penalties associated with excesses. Organizational The mission of organization; consistency of policies; views on management improvement of organizational performance; and the frequency of political interference in the organization. Corruption Significance of corruption as a problem; the location and form of corruption; the regularity in corruption reporting; and measures to help reduce corruption. Sampling features The sample was designed to ensure adequate representation of the various types of government agencies, different categories of public officials, and diverse geographical locations. The sample was defined in a detailed fashion, with a clear identification of the types of state organizations as well as the number of interviewees for each type. Country specialists on Guyana were consulted to arrive at this sample distribution. 11 The survey was conducted in the branches of the civilian government identified in Figure 1. The sample was drawn from ministries and directorates (50%), regional administrations (33%), and statutory bodies (17%). Nine ministries, six statutory bodies, and five kinds of regional administrations were selected for the sample. Figure 4 Distribution of the sample Figure 5 Distribution of the sample among kinds of tasks performed by among kinds of organizations. the officials Distribution by categoly of officials Distribution by Agency Type Semi-iillcd pcemai and uni ll:d 4% Swuy di [7% CinWl nd of lia: p _ 12% Otnee idiniad l andR csl kllnd 20% Rqnii 33% i ~~~~~~~~~~~~~~~Adminndv&,nn SnW"or ledical 25% Adminhantiave =_38% vWS Manend E____ _385__0% 0% 10% 20% 30% 40% 50% 0% 10% 20% 30% 40% 50%* 60% 38% percent of the sample consisted of officials performing administrative tasks. Other groups of staff in the sample included senior technical staff (25.3%), other technical and craft-skilled staff (20.3%), clerical and office support staff (12.2%) and semi-skilled operatives and unskilled (4%). About two-thirds of the sample was drawn from the Demerara-Mahaica region, an urban district.'4 The remaining third of the sample was drawn from regions 2, 3, 6, 7 and 10.15 The typical respondent of the public officials' survey was a female employee between 45 and 55 years of age, with a school-leaving certificate (CXE/GCE) and with 5 to 10 years experience. She was substantively appointed to her post, serving in a ministry at the time of the survey, and in 5 years' time expected to be working in a different position in the same organization. She had dependent children, had not received any training outside of her country, seemed sincere in her responses and had cooperated with the surveyor. Survey administration The Guyana survey was administered by six officers of the Public Service Management Ministry/Office of the President, in the period of November 1999-March 2000. The overall supervision and coordination of the project was provided by Leila Parris, the Deputy Permanent Secretary of the ministry. A total of 454 civil servants were interviewed for the purpose of this survey. 1 4 Demerara - Mahaica is the largest region and includes Georgetown. 15 These and other regions are listed in Appendix 1. 12 The survey questionnaire was pre-tested among a group of fifty public officials. The lessons learned from the preliminary testing were incorporated in the final questionnaire. The survey was administered with the support and co-operation of various agencies and their senior managers. This support was particularly useful in ensuring timely selection and availability of respondents. The questionnaire was then administered through face-to-face interviews. In the case of sensitive questions, respondents were given booklets to indicate their choices, which were later sealed in the envelopes to ensure anonymity. Surveyors were trained through mock interviews. Surveyors submitted the completed questionnaires to the survey coordinator in a timely fashion. The survey coordinator in turn submitted these completed questionnaires for data entry. Incomplete or inconsistent questionnaires were rejected and agencies were asked to identify alternate respondents. The survey coordinator reported some difficulties during the course of survey implementation. Many public officials expressed their unwillingness to participate in the survey, either because they had insufficient time to be interviewed or were unavailable for the scheduled interviews. The timing of this survey coincided with the government's exploring possibilities for rightsizing the civil service. Some officials were skeptical that the survey responses would be factored into the rightsizing project and refused to be associated with the survey. of those who agreed to be interviewed, some were reluctant to answer the more "sensitive" questions; some employees had difficulty in responding to the more technical questions and issues. Many of these difficulties were resolved through regular meetings of the entire project team. More information on the survey purpose and its possible benefits was shared with skeptical respondents. Some interviews had to be re-scheduled for those who were not available at the time of the interview. For others who declined to be interviewed, replacements were made with other public officials of comparable positions. Respondents were assured of strict anonymity and confidentiality during the whole survey exercise. 13 3. Survey findings Survey data was used to test ten "commonly held views" about the Guyanese public sector. This common knowledge or set of prior assertions emerged from reports on the Guyanese public sector and contributed to questionnaire design.16 The results are summarized below. Table 4 Common assertions tested'7 Prior Hypotheses/Assertions Whether supported by survey findings 1. Public sector jobs are attractive Supported 2. Public employees are poorly prepared for their jobs Partially Supported 3. Officials find the policies that they are asked to Not Supported implement are inconsistent 4. Recruitment is not merit-based Partially Supported 5. Politicians meddle in day to day operational Partially Supported decisions of the public sector 6. No incentives for good performance and few Supported disincentives for bad performance 7. If only more money were available, organizations Partially Supported, but public would perforrn better officials think performance evaluation systems will improve organizations' performance more than higher ._______________________________________________________ salaries. 8. Decision-making in the public sector is Supported characterized by poor communication and low employee participation 9. Corruption is a serious concern Supported 10. Budget management remains weak Supported * Public sectorjobs are attractive. Respondents were asked to state what influenced their decision to join the public sector and whether any expected features were absent. Two-third of all respondents noted that a "good salary" was absent. 82% of officials said that their government salaries were not sufficient to pay their living expenses, and more than two-thirds of surveyed employees stated that they supplement their salaries with support from other members of their families or relatives overseas. 16 For instance, World Bank (1993; 1999b; and 2000a). 17 Questions that were used to test these prior assertions are listed in Appendix 2. 14 Figure 6 Reasons why officials joined Figure 7 Ways in which officials the public sector supplement salaries P00.-- 3% er77 lo po 3s ~~ ~~~~~~~~~~~~~~~~~otb 10% 0_ 35% good - 7 16% 0N0 E3 2% ko*d Pp.6oro - 1 21% a -W-i sus ! 22% suqol fo rli = 27% on6b6k bad 3_,d. o 20% from of 42% fkgibk horo . . f-d 24%b -fi. - 30% addiuon.l befln 3 3% cwmOOntoS lo orggmooon mogon -.- 39% pb seasily _ ~~~~~~~52% .% 0% 10% 20% 30% 40% 50% 60% 70% 0% 10% 20% 30% 40% 50% Despite some dissatisfaction with wages, public sector jobs are attractive, and five out of six respondents said that the lives they had led during the past year were either good or acceptable. "Opportunity for personal development" was cited most often as the main reason for joining the public sector, followed by "job security." One-third of all respondents said they were "not at all worried about losing their jobs" in the near future, and another one-third said they were "somewhat worried." Some policy makers in Guyana consider that on-the-job training gained by public officials furnishes them with skills that are valued in middle-level jobs in the private sector. This explains the high turnover of staff at government's clerical levels, as 64% of all respondents perceive that people who left public service jobs were at the clerical level when they left. Figure 8 How do officials rate Figure 9 Levels in the public sector the quality of lives they lead? from which most exits take place top management 6% a5% E ~ ~ Rsenior technical S% middle 9 management technical ; 21% .% cckrical 6- = } 4% 0% 10% 20% 30% 40% 50% 60% 70% The survey coincided with a government initiative at rightsizing the civil service. 15 * Public employees arepoorlypreparedfor theirjobs. The average education level of surveyed officials was not high: 18% of sampled officials had bachelor's or higher degrees. Given that officials who join the public sector do not have a high level of education before they come to their jobs, on-the-job training becomes all the more important. Yet, less than half the respondents (48%) said that new hires were provided with a basic orientation program. Neither are officials trained in the substantive content of their jobs: 58% respondents said they had taught themselves their jobs. Just over half the respondents (52%) received any formal training at all. Most of those who did receive this training found it useful and subsequently used at least half of the newly-learned skills in their current work. Figure 10 Education levels of Figure 11 Part of the formal training surveyed officials that officials applied to their jobs Other /37% 1 Fh.D. 0% none at all []s% Master's degree 133% - 3 a little m 11% Post grad. Diploma 3 2% Bacheloes degree 13% abouthalfofit 24% undergrad. Diploma 14% CX/GCE (certificate) I 7 7 7 31% a great deal .A 59% 0% 10% 20% 30% 40% 0% 10% 20% 30% 40% 50% 60% 70% Officials find policies consistent, and implement policies even when they disagree with the policy thrust. Three-quarters of all respondents found instructions and policies of their organizations to be consistent rather than conflicting. In general, the credibility of a government's announced policies can be undermined when frequent changes in leadership result in equally frequent policy reversals. Officials are less inclined to work to implement policies that they doubt will be sustained. Even without a change in leadership, policy- making can be captured or frequently reversed for immediate, temporary gain. In such circumstances, public officials are subjected to contradictory policy guidelines, and their organizations are given conflicting instructions. However, surveyed officials in Guyana report that this is not a perceptible problem in their own public sector. While officials in Guyana believed policies to be consistent, they did not necessarily agree with or support the policies they are asked to implement; this was true of half the surveyed officials in Guyana. 16 * Recruitment is not always based on merit. Surveyed public officials reported that the recruitment system is based on merit. 61% of surveyed officials believe that persons recruited were the ones most qualified for their jobs. At the same time 37% said that they were assured of getting their jobs before they applied, and only 14% of the sample (of which one-third had not completed school) said written examinations were a regular practice in their organization's recruitment practice. This seems to contradict officials' possibly self-interested view that recruitment is merit- based. Although service commissions are entrusted to ensuring fair and merit-based recruitment, the widely held view is that there is extensive patronage in practice.'9 Figure 12 Officials who were assured of Figure 13 Officials who were obtaining their jobs even before recruited on the basis of written they applied examination I~ One factor could be the dearth of formal educational qualifications among the applicants. With such a poorly educated workforce to draw on, written examinations would do little to identify potential talent, and applicants who have the necessary qualifications would be assured of jobs even before they applied. Politicians' interference in operational decisions of the public sector is at acceptable levels. 59% of surveyed public officials reported that politicians rarely or seldom interfere in operational decisions, and two-thirds of respondents said that recruitment is not driven by political connections. A majority of officials believed that employees with political connections are treated the same as officials without connections. These responses need to be interpreted with caution. In assessing political micro- management in the civil service, World Bank (2000a) reports that the horizontal checks by the legislature on the executive are weak. 19 World Bank (2000a) 17 Figure 14 Officials' perceptions of Figure 15 Officials' perceptions of whether politicians' interference is a whether politically well-connected significant problem colleagues are treated better almost never 28% infrequently 31% frequently _ 27% l 25v very frequently 15% 0% 5% 10% 15% 20% 25% 30% 35% * Mixed results on incentives for good performance or few disincentives for bad perfornance On this point, the survey responses present a conflicted picture. On the one hand, more than half the surveyed officials (52%) said that there existed documented work/ performance standards for each function in their organization; and 58% of respondents said that in their organizations, employees and supervisors discussed measurable annual objectives at the beginning of every year. of these, 82% said that the documented work standards of their organization are typically achieved. This paints a picture of public sector organizations with measurable targets, disaggregated into individual employees' objectives, that are made explicit to the employees each year. On the other hand, more than half the respondents' (54%) performances had been appraised more than two or three years ago or never at all. It is not immediately clear how, if performance had not been evaluated, documented work standards could have been achieved. Performance appraisal is clearly not consistent. When asked to choose which interventions would improve the performance of their organizations, the highest number of responses recommended a performance appraisal scheme. In light of the numerous complaints about poor service delivery, a possible explanation for these apparently contradictory reports is that the entire notion of work standards may have been misunderstood by many respondents. Very few work standards exist in the core public service. The few extant standards concern health professionals in the Ministry of Health, the Ministry of Education's examination standards and the Ministry of Public Works' engineering standards. A program is now being formulated in the PSM to introduce such standards to the public service in 2001. In addition, 28% of respondents also said that no staff from their organization had been disciplined in the previous three years. Two-thirds of the respondents thought that some or many officials who showed outstanding performance had not been rewarded because no incentives exist, and because there is no functioning appraisal system in place. 18 * Resources alone will not make organizations perform better. Officials cited inadequate resources, poor management style, weak communication and poor compensation as important factors in poor performance. Yet, officials did not see higher pay as the cure-all. It was cited as the second most important reform, behind performance evaluation. Figure 16 Intervention that can contribute most to improving organizations' performance performance evaluation scheme ; 45% revised pay structure . 42% merit-based pay scheme 38% restructuring agencies & developing improvement __________30% plans 30 institutionalizing work/performance standards 24% 0% 10% 20% 30% 40% 50% - Decision-making in the public sector is characterized by poor communication and low employee participation For public officials to implement policy effectively, policies must be communicated to them quickly and clearly. Surveyed officials in Guyana said that policy changes are communicated most frequently through written correspondence. This more formal approach may contribute to time-lags and confusion. Employees do not participate in decisions about their organizations' budgets. More than two-thirds of employees were not at all connected, or connected very little with budget preparation. When the division's budget is cut, less than one-fourth of respondents (22%) are involved in the revision of planned programs. * Public sector officials are concerned about corruption. 93% of all surveyed officials believe that corruption is significant in the public sector. Only 9% of officials reported having known of another official being disciplined for embezzlement. Officials in regulatory agencies (such as land registry, Supreme Court registry, customs and excise, births and deaths registry and licensing agencies) or in 19 positions involving purchases on behalf of govemment had the most ample opportunity for corruption-more than those in service delivery agencies (such as hospitals, educational institutions). Public officials believe that corruption occurred most frequently in (a) in evasion of taxes and customs duties, and (b) to avoid harassment by police or regulatory bodies. Officials consider that reporting corruption can be best encouraged by ensuring that the identity of the person filing the report be kept secret. Officials believe that merit-based recruitment, better pay and stiffer punishments will reduce corruption in the public sector. a Budget management remains weak. The funds available in the budget are unpredictable. According to surveyed officials, the only certainty is that available funds will be less than stated in the estimate. More than three-quarters of respondents believed that available funds would be less than announced in the budget estimate, and 73% believed that the difference would be moderate or large. More than two-thirds stated that when cuts are imposed, "capital expenditure" and "other charges" are hit first. However, there are few penalties for spending beyond the budget. 45% reported that in the previous year, their organizational budget or some budget sub-head had been exceeded, and 79% did not know whether organizations spending beyond the budget were in fact penalized. 20 4. Looking for points of entry: the impact of institutional environment on performance The model usedfor analyzing WBNPP surveys Public officials in developing countries are often viewed as unskilled, poorly equipped and poorly motivated to perform their official tasks. The assumption is frequently made that public officials are primarily motivated to exploit for their own benefit any official privileges that their positions allow. Given the poor performance of public bureaucracies in many developing countries, and the undeniable reality of low public sector salaries, such an assumption may not be wholly unrealistic. Yet, there are many public officials who, despite such poor incentives, may perform their tasks in spite of overwhelming incentives for opportunism. For every rent-seeking or poorly motivated public official, there may be another who is providing a valuable service. Therefore, it is worthwhile to examine in detail what motivates public officials to behave the way they do. Accordingly, the analytical model for WBNPP-funded surveys starts from the premise that public officials' actions-and hence the performance of their organizations-depend upon the institutional environment in which they find themselves. In this way the analytical framework avoids the "blame-the-government" approach common in the literature on the public sector in developing countries, without attempting a defensive justification for poor performance.20 The analytical model allows verification of the assumption that it is the institutional environment that drives performance of organizations in the public sector rather than the waywardness of officials. This model suggests that reform interventions that improve any or all aspects of the institutional environment will result in higher performance of some or all of the areas in which performance is measured. Figure 17 Analytical model for WBNPP-funded surveys Institutional environment: Performance: * Policy credibility * Results focus * Rule credibility * Accountability * Resource adequacy and * Employee morale predictability 20 See Tendler (1997) for a summary of these perspectives. 21 Measuring the institutional environment Elements of institutional environment selected to measure it The institutional environment was measured along three dimensions: rule credibility, policy credibility and resource adequacy and predictability. This is consistent with the analytical framework described in Manning, Mukherjee, and Gokcekus (2000) and is used for analyzing all WBNPP-funded surveys. This study recognizes that institutional environment can be considered along other dimensions and that the framework used can only reflect best judgement. Rule Credibility-The strength of institutions can be gauged by their impact on expectations.21 If there is a rule about the management of records in the organization, or about methods of performance appraisal, then do officials expect that breaches of these rules will really be punished? The present survey probed rule credibility mainly in human resource management, an area that is of most interest to public officials. Policy Credibility-The nature of officials' expectations is also important in relation to policy implementation. Willingness to gear actions to support ministerial policies is somewhat greater if officials believe that policies will remain in force for a period of time, and will not be undennined by other contradictory policies. Expectations that policies are likely to be soon reversed lead, at best, to second-guessing of what the next ones might look like. At worst, they lead to cynical disregard for any announced policy. Resource Adequacy and Predictability-Expectations concerning the future flow of budgetary and other resources are also significant detenninants of behavior. Officials who doubt that the budget will be implemented as planned may have few reasons to implement policies faithfully and every reason to over-staff, as salaries will ultimately be paid even if program funds are reduced. Accordingly, an organization with a high institutional environment score is one in which the rules matter and discipline is good. Government policies are taken seriously so that the staff is oriented toward their successful implementation. In such an organization, resources might be tight, but resource flow is at least certain. Conversely, organizations with low rule credibility are ones in which officials, generally speaking, do not expect the rules-about records management, training, and personnel 21 This point that institutional arrangements impact individuals' actions in the present by shaping their expectations about the future is made extensively in the institutional literature. See, for example, Bendor and Mookherjee (1987) and Mnookin and Kornhauser (1989). It is consistent with an assertion that the problem facing both public and private sector managers is one of maintaining their collective reputation as a relevant actor among their staff (See Seabright 1993). More generally, the literature on cooperation in the absence of third-party enforcement emphasizes that "the shadow of the future" (i.e., the degree to which actors expect to interact again under similar circumstances) significantly determines behavior in the present (See Axelrod and Keohane, 1985). 22 etc.-to be enforced. Staff discipline problems are to be expected in such organizations, but might not be reported, as action is less likely to be taken. In organizations with low policy credibility, officials do not believe that policies will remain in force for a period of time, and think that they may be undermined by other contradictory policies. Staff in such organizations might be expected to implement policies less than enthusiastically, considering that they might be soon reversed. Staff might even try to second-guess what the policy after this one might look like. Organizations with low resource adequacy and predictability are ones in which officials doubt that the budget will be implemented as planned. Such organizations may have reason to over-staff, as salaries will ultimately be paid even if program funds are curtailed. Figure 18 shows how responses to questions were grouped under different elements of institutional environment before constructing the institutional environment indicators in 22 Guyana. The questions are provided in full in Appendix 3. Figure 18 Construction of indicators for institutional environment |institutional environment| rule credibility policy credibility resource adequacy & predictability in recruitment policy Q. 21, 24 consistency Q. 63 in training policy about procedures cormunication Q.27,Q.28 Q.65 in perforrnance political appraisal (of _ micro- individual officials) management Q. 33, 38a Q. 52, 62 in appeal Q. 46 22 For details, see Appendix 3. 23 Construction of indicators of institutional environment. Using this method, eight detailed indicators were constructed, with "0" being the worst and "10" being the best possible scores. Four of these were related to rule credibility: rule credibility in recruitment, rule credibility in training procedures, rule credibility in performance appraisal, and rule credibility of appeal mechanisms. Three indicators related to policy credibility: policy consistency, policies communicated effectively to establish credibility, and political interference that undermines policy credibility. The final indicator relates to resource adequacy and predictability. In total the institutional environment is gauged through eight indicators. Indicators were constructed for rule credibility, policy credibility and for resource adequacy and predictability in each of the fifteen organizations sampled and the whole public sector. These calculations have been presented in Tables A7 through A12 in Appendix 3. The strongest component of the overall public sector's institutional environment is policy credibility (5.8/10) and the weakest one is rule credibility (5.3/10). Within policy credibility, officials rate policy consistency comparatively highly (6.6/10). The average of the various indicators describe an overall institutional environment in Guyana's public sector that is not particularly strong: officials rate their institutional environment score as 5.5 out of a possible maximum of 10. (For details, see Table A 12 and Figure A 1 in Appendix 3.) Within the public sector, organizations offer very different institutional environments to their staff. Figure 19 shows how the institutional environments of two organizations-the Ministry of Works and Communication and the Office of the Auditor General-are quite different. Employees of the Ministry of Works and Housing give their organization an overall score of 4.0/10, while the Auditor General's employees give their organization an overall score of 6.7/10. As this figure illustrates, the Office of Auditor General has higher scores in all the selected institutional environment areas-rule credibility, policy credibility and resource adequacy and predictability than the Ministry of Works and Communication. 24 Figure 19 Institutional environment of the Office of Auditor General and the Ministry of Works and Communication RC RC 10T 10 8 ~~~~~~~~~~~~~~~~8 51 ditor 1/,3 RP PC RP PC 0 Public sector El Public sector nl Min. of works and communication C; Auditor General Ministry of Works and Communications Office of Auditor General Rule credibility (RC) = 3.3 Rule credibility (RC) = 6.2 Policy credibility (PC) = 3.8 Policy credibility (PC) = 6.4 Resource adequacy and predictability (RP) = 4.7 Resource adequacy and predictability (RP) = 7.5 Implications for organizations The details are instructive. The Office of the Auditor General interacts almost entirely with other public organizations, and is shielded from policy changes. Without interaction with the public at large, perhaps, political principals do not find it a fertile ground for micro-management. Not surprisingly, its scores are higher than the public sector's average in seven out of the eight elements-except policy communication. The other example, the Ministry of Works and Communication shows a different picture of the institutional environment. Its scores are below the public sector's average in seven out of the eight elements. (Figure A 2 and Figure A 3 in Appendix 3 provide further details.) The Ministry of Works and Communication appears to be an organization with low rule credibility. This is an environment in which officials, generally speaking, do not expect the rules to be enforced. This is also an organization with low policy credibility. Officials do not believe that policies will remain in force for an extended period of time and also think that they may be undermined by other contradictory policies. As noted, staff in organizations with low policy and rule credibility might be likely to implement policies less than enthusiastically, considering that policies might be soon reversed. Despite the continuing debate on the independence of the Auditor General and the need for a separate appropriation, the Office of the Auditor General is somewhat protected from the vagaries and uncertainties of funding that afflict the rest of the public sector. This appears in the survey results. 25 The fifteen sampled organizations' relative strengths and weaknesses (in terms of their rule credibility, policy credibility and resource predictability) have been summarized in the Table 5 below using the standardized indicators.23 (Table A 13 in Appendix 3 provides the detailed standardized indicators for the three components of institutional environment.) Table 5 suggests that general observations about institutional weaknesses in the Guyanese public sector could mask a variety of difficulties faced by each individual agency.24 When looking for lessons, it is important to note that recent events can temporarily alter institutional environment. It is also important to bear in mind that a weak institutional environment is not the fault of managers within that organization. On the same note, local management cannot be held responsible for resource predictability issues that originate in weak overall budget management. That said, local management in those organizations with poor institutional environments should be aware of existing problems and should have considered the need for corrective action. The situation in the Ministry of Works and Communication might fall into this category. 23 In making that determination, +/- one standard deviation was used as the criteria for whether an organization is relatively weak or strong. 24 The Anna Karenina principle applies: "all well-performing agencies are alike; there are so many preconditions for effective performance that every dysfunctional agency is dysfunctional in its own way". Tolstoy's original words were that "Happy families are all alike; every unhappy family is unhappy in its own way." Gary Reid pointed out the relevance of the observation for public sector performance. 26 Table 5 Institutional environment in different organizations Overall Institutional Scores Summary Environment Ministries X _ _ _ Agriculture Average Education Average Finance Average Housing and Water Average Labor & health Average Works & Communication Low RC, PC - - Weak Regional Administrations Region 2 Average Region 3 Average Region 6 Average Region 10 High PC + Control Bodies Office of Auditor General High RC, RP + + Strong Public service commission Low RP Parliament office High PC, Low RC, RP +-- Weak Service Delivery Agencies Water Authority Low PC Georgetown Sewage Commission Average ED Scores in three indicators of institutional environment: rule credibility (RC); policy consistency (PC); and resource predictability (RP). Measuring performance Performance was measured through survey questions on organizations' focus on results, accountability and employee morale. The degree to which these elements were or were not lacking was measured on a "0 to 10" scale, with "0" being the worst and "10" being the best. In the absence of organization-level performance targets, monitoring or evaluation these indicators were considered good proxies for conditions that induce good performance. 27 Figure 20 Construction of indicators for performance in Guyana l perfomnance l l results-focus ll accountabiiity ll employee l I Il morale geared to enforceability salary: adequate & timely organization's of regulations Q. 16,33 objectives Q. 6 42 organi ctione activitiesnaare geargedto its obectives; whteruitheognztomsefent;g_ Q1 efficiency job secunty Q. 62 i training ce in perfemrance pi eQ. 20 Q. 31 A appraisal i Q. 34 nmerit-based l incentives | delegation l Q. 48 &49,43 &44 Q. 394 X corruption l Results-focus was measured by creating an indicator covering the following: whether an organization's activities are geared to its objectives; whether the organization is efficient; and whether there is in place a merit-based incentive/reward and punishment system. Seven questions were used. The questions and details of the indicator are shown in Tables A 14 and Ab1 5 in Appendix 4. Accountability was measured by using eight questions to create an indicator covering the following: enforceability of regulations, delegation to other officials, and corruption. As noted above, enforceability of regulations as a component of performance is different from the existence of effective rules and regulations. In measuring performance, the enforcement of the rules was tested in four areas, namely record management, recruitment, training, and performance appraisal. The list of questions for accountability and further details of the indicators are given in Table A 16 and Table A 17 in Appendix 4. Employee morale was measured by creating an indicator covering adequacy and timely payments of the salaries, quality of life, and job security. Four questions were used to calculate the satisfaction indicator. The questions and calculations are presented in Appendix 4. In particular, the list of questions for employee morale and details of the indicator are given in Table A 18 and Table A 19 in Appendix 4. 28 The overall performance indicator was calculated by taking the simple arithmetic mean of the results-focus, accountability, and employee morale. Table A 20 in Appendix 4 presents performance indicators for fifteen public organizations and the public sector of Guyana. The connection between performance and institutional environment To describe and quantify the relationship between performance and institutional environment, a simple model was used. Aggregate performance and its three components, i.e., results-focus, accountability for formal rules, and employee morale were regressed on institutional environment. Accordingly, performance of organization-i was modeled as a function of its institutional environment, and an error term ei25 Performancei = a + b 1Ei + ei For the public sector of Guyana, there is a statistically significant positive relationship between institutional environment and performance indicators. The estimation result for Guyana was the following: Aggregate Performance = 1.28 + 0.60 (Institutional Environment) t-value = 2.75 R2= 0.37 Obs.No= 15 Figure 21 provides the result of cross-tabulation of institutional environment and aggregate performance indicators for 15 different public organizations in Guyana. Statistically significant relationships existed between the institutional environment and each area of performance Thus there is empirical evidence that: * Institutions do indeed matter; and * Some performance areas might be more significantly affected by the institutional environment than others. . (Figure A 4 Figure A 5 and Figure A 6 in Appendix 5.)26 25 An error term was attached to capture measurement errors, random variations, as well as other determinants that have been omitted from the equation. 26 This assertion was based on differences in the estimated coefficients, i.e., slope, and in goodness- of-fit measures, i.e., R2, for the relationships between institutional environment and three different components of performance, which are presented in Appendix 5. 29 Where are the opportunities for reforms? The basic premise for WBNPP-funded surveys is that performance is a function of the institutional environment: Perfonnance = f (Institutional Environment). This performance function has already been estimated in the previous sub-section. It showed that in Guyana, the predicted correlations are high when simple averages of the elements of institutional environment are regressed against aggregate performance, as well as its three main components. However, this information by itself is not enough for decision-makers. They already know that performance is sometimes low because of weaknesses in the institutional environment; and that if they could improve the whole institutional environment, the overall performance would improve. They need greater precision. Improving the institutional environment as a method for improving performance is a practical strategy only if we can assess which particular elements of the institutional environment really matter. In other words, decision-makers need to know which areas for reformn efforts could have the greatest pay-off. Figure 21 The relationship between institutional environment and performance in fifteen public sector organizations of Guyana 5.5- R 3 ~~~~Auditor general erformance = 0.60 IE + 1.28 go = 0.61 4 Sewage 5 - ~~~Water Mi Public service ,ath commission Region 2 Min. of education X 4.5 - o / * ~~~~~~~~~~~~~~Min. of finance a / Region 6 ~~~~~~~~~~~Region 10 ; + / *~~~~~~~~~~~~ Min. of agriculture v 4 -i m n of fice 3.5 Min. of works & Min. of Housing & communication water 3 3 3.5 4 4.5 5 5.5 6 6.5 7 r= correlation coefficient Institutional environment (IE) 30 To answer this question for the public sector of Guyana, performance was modeled as a function of eight different components of the institutional environment (EI). Performance = g(existence of rules in recruitment, existence of rules in training, existence of rules in performance appraisal, existence of rules for appeal, policy consistency, policy communication, political interference/micro- management, resource adequacy & predictability) To unpack the relationship between institutional environment and performance, or in other words, to quantify the relationship between performance and different potential reform efforts, an econometric model was utilized to estimate this model.27 Its estimated coefficients were used to derive appropriate indicators. In general, to find how much performance changes upon changing i-th component of the institutional environment, the following formula was utilized: A perfornance / Aihtcomponent of IE Pay-ofithlcomponent of IE perfonnanceo where, Apeifiormance/Ai'hcomponent of JE - ,} performance aw i/component of IE ,and performanceo = initial performance level. Performance pay-offs (PPOs) A comparatively high-value of performance pay-off for any reform effort means that the intervention is more likely to have a significant impact on performance than another with low-value. A comparatively low value would indicate that the effort is less likely to have an impact and will not bring about substantive results. Performance pay-offs can be calculated for each of the eight reform interventions listed above. (Refer to Appendix 6 for the following: a detailed econometric model specification, the estimation method, regression results, and how the estimated coefficients were used in deriving performance pay-offs based on the above-described formula.) In moving from general observations toward identifying the specific impetuses of performance, two cautions should be borne in mind. First, like any other data collection exercise (despite quality control on survey administration and data collection and entry) 27 In a linear model, the estimated coefficient for a specific component of the institutional environment variable is the partial derivative of the performance with respect to that component of the institutional environment. 31 28 there are inevitable limitations on data quality. Second, theory provides no guidance in suggesting which institutional area in particular most affects performance, thus a more complete model of performance would very likely alter the magnitude of the estimates. Given the possible imprecision of the measure, rather than predict exact performance improvements, PPOs are used to rank the expected pay-offs from different interventions (i.e., change in institutional arrangements or practices). Accordingly, the PPOs are intended to draw attention to the varying results that are anticipated from different interventions, but given their probable imprecision, it is the general magnitude of the pay- off rather than the exact value that is relevant for policy makers. Figure 22 summarizes the results for those determinants of performance which have estimated statistically significant coefficients at the 0.05 level or better, for one-tailed test. (For details, see Appendix 6.) This figure assumes that only those perceiving the institutional environment to be poor are affected by the interventions - i.e. that there is no wasted effort. Figure 22 Maximum impact of reforms on results-focus and accountability in Guyana 0 Ir i results focus -0 accountability Reform Intervention Having merit-based recruitment 3% Documenting work/performance standards for each function Making government policies consistent $* 3% Preventing political interference/micro-management 4% Providing appropriate training 0 Communicating government policies properly > 4% Defining/disseminating annual organizational ______________________ objectives/targets 3 0% 5% 10% 15% 20% Percentage increase in present level of performance However, in reality, many public officials will be unaffected by an intervention as it will not influence any perceptions that affect their behavior. If, for example, a particular 28 For details, see Section 2. 32 public official already considers that employment is merit-based, then there is little to be gained by persuading them that recent reforms are introducing merit. In effect, much of any given reform effort is wasted. The exact amount is of course unknown, but Figure 23 estimates a range that lies between optimistic and pessimistic Performance Pay-Offs for 'results focus' and for 'accountability'. For the optimistic PPOs, it assumes that the intervention effectively reforms all of those people that will be affected by it - i.e. that no effort is wasted. Somewhere near this optimistic figure might be achieved if a particular reform intervention were targeted at an agency or a group of officials that consider this aspect of their institutional environment to be particularly weak. The pessimistic PPO is calculated on the basis that the reform intervention is targeted appropriately but successfully reforms only a part of those affected by it, and that it is therefore 'wasted' on those officials whose perceptions of the institutional environment will not be improved by it. Figure 23 Range of impact on results focus Having merit based recruitment Making government policies consistent Preventing micro-management i Documenting work-performance standards for each function Communicating government policies properly Providing appropriate training Defining and disseminating annual objectives/targets 0% 2% 4% 6% 8% 10% 12% 14% 16% Percentage increase in the present level of performance 33 Figure 24 Range of impacts on accountability Documenting work-performance standards for each _ function Providing appropriate training Making government policies consistent _ Having merit based recruitment Defining and dissenminating annual objectives/targets Preventing micro-management Communicating govemnment policies properly 0% 1% 2% 3% 4% 5% Percentage increase in the present level of perforiance Bearing in mind the caveats on data quality and the lack of theory to provide guidance in this area, these interpretations suggest two key messages for reform design. If the reform goal is to achieve a larger proportion of employees that consider that their own performance is geared towards organizational objectives and who find that available incentives have some significance for their behavior, then being clearer about annual organizational targets is a very useful way to start. This is not about work standards - measures that set detailed benchmarks for small elements of public officials' tasks - it is about being clear what the larger objectives of the organization are, and letting employees know whether they are getting close to achieving them. So, one message from the survey is to publicize larger goals and targets. The second message is very consistent. Reducing political micro-management and communicating policies more clearly to employees is likely to be associated with increasing the proportion of employees that consider themselves to have been held accountable - in the sense that they feel that regulations applied to them are enforced, that they have adequate delegation and that corruption is limited. 34 5. Implications for interventions The public sector of Guyana is undoubtedly under severe pressure. Two thirds of respondents to the survey supplement their salaries with support from relatives or help from overseas. The public service employs people with few qualifications, and then fails to train about half of them. More than half had not had their performance appraised within the last two years, and 95% felt that corruption is significant. Responses to survey questions were used to quantify officials' assessment of their own organizations' institutional environments and this suggests that some organizations provide particularly weak institutional environments for their staff. Overall, the results of the data analysis support some common beliefs about the public sector. Officials agreed that decision-making in the public sector is characterized by poor communication and low employee participation, that corruption is a serious concern and that budget management is weak. Only 60% consider that jobs are allocated on merit and only the same proportion feels that politicians do not meddle in day to day operations. That said, it is not a public sector in crisis. Five out of six respondents said that their lives were good or at least acceptable. Recognizing that there are political appointees, a majority of employees feel that these are treated the same as everyone else. Above all, it is a public sector with staff able to exercise judgement. When asked what measures would most likely improve their organizations' performance, the same officials who complained that their salaries were not sufficient to pay their living expenses chose consistent performance evaluations as the reform intervention most likely to improve performance. Officials selected performance evaluation over higher pay as the most potentially effective reform intervention. So officials know that their own organizations' performance is low - with an average score of 4.4 out of a maximum possible of 10 - yet they believe that extra resources or higher salaries alone, without other changes, will not improve performance. Across the fifteen sampled organizations of the public sector, there is strong evidence that performance does indeed depend on organizations' institutional environment, and therefore reform interventions targeted at improving the institutional environment will be accompanied by higher performance. Data analysis shows that overall, officials rate the public sector's institutional environment at a score of 5.5 out of a maximum possible of 10, though within this weak environment, policy credibility is relatively strong. Indeed, officials disagreed with the common belief that they are often asked to implement inconsistent and conflicting policies. It is rule credibility that is the weakest element, which means that officials believe that even if they perform poorly, there will be little or no consequence. Indeed survey evidence brings out remarkable lack of incentives in the public sector. There are no incentives for good perforrnance, and few punishments for bad performance. The results point the way to alerting local managers to particular weaknesses in the institutional environment that their agency provides for their staff, and the contrast 35 between the Ministry of Works and Communications and the Office of Auditor General is instructive. In considering broader cross-cutting reforms, data analysis shows that some interventions are more likely than others to result in higher performance. The two key messages for reform design are that publicizing larger goals and targets, and reducing political micro- management and communicating policies more clearly to employees, are likely to be associated with significant improvements in results-focus and in perceived accountability. This report presents one set of interpretations of the survey findings. To enable deeper interpretation of survey data, the results have been posted on the Internet, where readers are invited to peruse it and draw their own conclusions. The ensuing debate will increase awareness of the need for reform and engender a more robust evaluation of the available reform options. 29 http://www l.worldbank.org/publicsector/civilservice/countries/guyana/index.htm 36 Bibliography Acs and Gerlowski. 1996. Managerial Economics. New Jersey: Prentice Hall. Axelrod, Robert, and Robert Keohane. 1985. "Achieving Cooperation Under Anarchy: Strategies and Institutions." World Politics. 38(1): 226-54. Bendor, Jonathan, and Dilip Mookherjee. Institutional Structure and the Logic of Ongoing Collective Action." The American Political Science Review. 81-1: 129- 154, 1987. Government of Guyana. 1999. The Official Gazette. Georgetown. Greene, William H. 2000. Econometric Analysis, Fourth Edition, New Jersey: Prentice Hall. Horn, Murray J. 1995. The Political Economy of Public Administration: Institutional Choice in the Public Sector. New York: Cambridge University Press. International Monetary Fund (IMF). 1998. Guyana-Statistical Appendix. IMF Staff Country Report No. 98/13. Washington, D.C. _.___ 1999. Guyana: Recent Economic Developments. IMF Staff Country Report No. 99/52. Washington, D.C. Manning, Nick, Ranjana Mukherjee, and Omer Gokcekus. 2000. Public Officials and Their Institutional Environment: An Analytical Model for Assessing The Impact of Institutional Change on Public Sector Performance. World Bank Policy Research Working Paper 2427. World Bank, Washington, D.C. Mnookin and Kornhauser. 1988. "Bargaining in the Shadow of the Law: The Case of Divorce." Yale Law Journal 88: 950-72. PSM, 2000. E-mail communication from Grace MacCalman, Ministry of public Service Management (psm@sndp.org.gy). Rama, Martin. 1999. "Public sector downsizing: an introduction." The World Bank Economic Review 13(1). World Bank, Washington, D.C. Seabright, Paul. 1993. "Managing Local Commons: Theoretical Issues in Incentive Design." The Journal of Economic Perspectives. 7(4): 113-34. Schiavo-Campo, Salvatore. 1998. "Government Employment and Pay: The Global and Regional Evidence." Public Administration and Development 18: 457-78. World Bank. 1993. "Guyana: Public Administration project." Staff Appraisal Report No. 11258-GUA. Washington, D.C. 37 . 1995. "Guyana: Selected Issues in Public Expenditure Management." World Bank's Internal document. Unprocessed. White cover. World Bank, Washington, D.C. 1 l999a. "Civil-Service reform: A Review of World Bank Assistance." Operations Evaluation Study 22. Report No. 19211. World Bank, Washington, D.C. 1 l999b. "Report and Recommendation of the President of the International Development Association to the Executive Directors on a proposed PSR Adjustment Credit to the Cooperative Republic of Guyana." Internal Document. World Bank, Washington, D.C. _.___ 2000a. "Guyana: Reorienting Public Expenditures to Serve the Poor." Report No. 20151-GUA. Green Cover. World Bank, Washington, D.C. . 2000b. "Reforming Public Institutions and Strengthening Governance: A World Bank Strategy." http://www-wbweb.worldbank.orglprem/prmps 38 Appendices Appendix I Details of public sector organizations Table A 1 List of ministries Ministry of Home Affairs Ministry of Human Services and Social Ministry of Finance Security Ministry of Foreign Affairs Ministry of Public Works And Ministry of Legal Affairs Communications Ministry of Agriculture Ministry of Local Government Ministry of Health And Labour Ministry of Information Ministry of Education Ministry of Housing And Water Ministry of Trade, Tourism And Industry Ministry of Culture, Youth And Sports Table A 2 List of semi-autonomous agencies Ayanganna Consultants Ltd. MARDS Workshop Black Bush Polder MMA/ADA Central Housing and Planning Authority National Commemoration Commission Commonwealth Youth Programme National Dairy Development Programme Complaint National Data Management Unit Demerara Harbor Bridge National Frequency Management Unit Drainage and irrigation Board National Library Georgetown Sewage and Water Commission National Museum Go-Invest National Sports Commission Guyana Export Promotion Council National Trust Guyana Information Service Police Authority Guyana National Bureau of Standards Public Utilities Commission Guyana Relief Committee SIMAP Guyana School of Agriculture Statistical Bureau Guyana Water Authority Sugar Industry Labour & Welfare Fund Hope Estate University of Guyana Institute of Distance and Continuing Education Table A 3 List of constitutional agencies Office of the Auditor General Teaching Service Commission Office of the Ombudsman Public Prosecutions Public and Police Service Commission Public Service Appellate Tribunal Elections Commission 39 Table A 4 List of public corporations Berbice Mining Enterprise Limited Guyana National Shipping Corporation Limited Guyana Broadcasting Corporation Guyana Oil Company Guyana National Co-operative Bank Trust Guyana Post Office Corporation Corporation Guyana Rice Milling and Marketing Authority Guyana National Co-operative Insurance Guyana Television Broadcasting Company Services Limited Guyana Sugar Corporation Guyana National Cooperative Bank Linden Mining Enterprise Limited Guyana National Mortgage Finance Bank National Insurance Board Guyana National Newspaper Limited New Guyana Marketing Corporation Guyana National Printers Table A 5 List of regions Region I - Barima/Waini Region 2 - Pomeroon/Supenaam Region 3 - Essequibo Islands/West Demerara Region 4 - Demerara/Mahaica Region 5 - Mahaica/Berbice Region 6 - East Berbice/Corentyne Region 7 - Cuyuni/Mazaruni Region 8 - Potaro/Siparuni Region 9 - Upper Takatu/Upper Essequibo Region 10 -Upper Demerara/Berbice Table A 6 Grades and pay scales Band Minimum Mid- oint Maximum Guyana $ US $ Guyana$ US$ Guyana US $ 01 19,000 105 20,342 113 21,679 120 02 20,728 115 22,373 124 24,019 133 03 22,405 124 24,254 134 26,097 144 04 23,427 130 25,408 141 27,391 153 05 26,395 146 29,816 165 33,238 184 06 30,384 168 34,338 190 38,288 212 07 34,991 194 43,371 240 51,755 287 08 42,664 237 53,311 296 63,960 355 09 51,646 286 66,035 366 80,428 446 10 63,871 354 84,210 467 104,550 580 11 80,328 446 106,950 594 133,579 742 12 98,886 549 136,515 758 174,141 967 13 125,167 695 172,790 959 220,418 1,224 14 152,130 846 217,542 1,208 282,775 1,570 40 Appendix 2 Questions behind the prior assertions Public sector jobs are attractive Q17. If it is insufficient, how do you make up the shortfall? salary or wages from another job overtime in my organization support from other family members support from relatives overseas pension additional financial benefits from my organization Q18. Would you describe the quality of life that you have maintained over the past year as unacceptable, acceptable, or good? unacceptable acceptable good Q19. How worried are you about losing your job sometime in the near future? Are you very worried, somewhat worried, or not at all worried? very worried somewhat worried not at all worried Q22. There are many different reasons why people choose to work for the government. Below is a list of factors that other people say influenced their decision to join the public sector. Please tell me if any of these factors influenced your decision to pursue a government job, and how would you rank them in terms of greatest influence? [If you feel that two or more factors contributed the same amount to your decision, you can rate them the same number]. Secondly, indicate whether any of these features are absent from your job. job security good salary benefit flexible hours reasonable work load opportunity for personal development social status power limited opportunities elsewhere personal satisfaction in work commitment to organization mission other [ specify] 41 Q24.10 Within an organization, different people are hired for different reasons. This survey is interested in learning about general hiring trends. In your organization would you say that employees were hired more often for: Almost Most About Fewer Very all half than few half good performance at entry test qualifications met job requirements personal connections political connections family status in community payment of gift to some public authorities knew a senior official Q41. At what levels would you say there is a high turnover of staff? clerical levels technical levels middle management level senior technical levels top management Public employees are poorly preparedfor their jobs Q 9. What is your highest academic qualification? CXC / GCE (Certificate) undergraduate diploma bachelor's degree post grad. diploma masters' degree Ph D Q1l. Have you ever received any training or education outside of this country? yes no Q27. In your organization, is there a period of job/ organizational orientation before an officer is placed to function? yes no Q28. In your organization which of the following methods have you used to learn your job: a written procedure guide verbal instructions from a superior verbal instructions from a colleague self - taught Q29. During the past year have you received any formal training at all? yes no Q3 1. How much of this new knowledge are you now using on the job? a great deal about half of it a little none at all 42 Policy credibility is low Q63. Agencies receive instructions and policies from different parts of the government, some complement each other, others present conflicts. Overall, how do you see these various instructions: i.e. the relationship of these instructions/ policies with each other? very consistent more consistent than inconsistent more inconsistent than consistent very inconsistent Q64. How often do you disagree with the policies that your orginization is asked to implement? often occasionally rarely not at all Recruitment is not merit-based Q2 1. Are positions like yours generally advertised to the public? yes no Q24. Within an organization, different people are hired for different reasons. This survey is interested in learning about general hiring trends. In your organization would you say that employees were hired more often for: almost all most about fewer very few half than half good performance at entry test qualifications met job requirements personal connections political connections family status in community payment of gift to some public authorities knew a senior official Q25. Before you applied for your current job or when you first joined the government, were you assured that you would get the job? yes no Q26. Would you say that written tests are a regular practice in your organization's recruitment process? yes no 43 Politicians meddle in day-to-day operational decisions of the public sector Q67. In your opinion, how would you rate the frequency of incidents of political interference in your organization? very frequent frequent infrequent almost never Q24. Within an organization, different people are hired for different reasons. This survey is interested in learning about general hiring trends. In your organization would you say that employees were hired more often for: 24.4 political connections almost all most about half fewer than half very few No incentives for good perfornance and few disincentives for bad perfornance Q34. When was your performance last appraised by your supervisor? last quarter within a year end of first quarter one year ago two years ago three years ago more than three years my performance was not appraised Q35. Did you agree with your supervisor's appraisal of your performance? yes no Q37. Are there documented work I performance standards for each function in your organization? yes no Q38. (a) Are you aware of these standards? (b) Are they generally achieved? yes no yes no Q39. Are you allowed to make any decisions relating to the performance of your duties? I seldom need to refer decisions to my boss I refer half of the decisions that need to be made to my boss I refer most of the decisions that need to be made to my boss Any decision that is required is made by my boss Q44.1 To the best of your knowledge, within the past three years, has anyone in your organization been subject to any of the following types of sanctions? dismissal demotion / reduction of position status denial of other benefits loss of salary or wages postponement of promotion or pay increase fine public censure or reprimand official warning other [ specify] Q46. Can an employee appeal a dismissal? yes no 44 Q48.In the past year have staff in your organization been recognized/rewarded for any of the following reasons? yes no Providing outstanding service Q50. How many employees of your organization with excellent performance have not received recognition / reward? many some a few no one Q51.2 Why do you think some employees with outstanding performance have not received rewards / recognition? There is no money for rewards No functioning performance system in place Good work is generally not appreciated No incentive scheme exists Not having the "right" party affiliation Absence of a "recognition" culture Q66.2 Which of the following do you think would contribute most to improving the organizational performance of your organization? merit-based pay scheme performance evaluation scheme institutionalizing work / performance standards restructuring agencies and developing improvement plans revise pay structure If only more money were available, organizations would perform better Q23. Sometimes factors at work cause any organization to perform poorly. Below is a suggested list, please indicate, first, which of these contribute to poor performance in your organization, next, rank them in order of greatest influence / impact . If you feel that two or more qualities are equally important, you can rate them the same number. management style unclear objectives and targets poor communication poor physical working conditions missing deadlines unresponsive policies to customers needs low concern for workers' welfare inadequate resources lack of employee recognition poor pay and inadequate benefits limited use of technology poor supervision cumbersome systems limited technical capacity in organization conflicting instructions from different sources other [specify] 45 Q66. Which of the following do you think would contribute most to improving the organizational performance of your organization? merit-based pay scheme performance evaluation scheme institutionalizing work/ performance standards restructuring agencies and developing improvement plans revise pay structure Decision making in the public sector is characterized by poor communication and low employee participation Q53. To what extent are you involved in budget preparation? very involved somewhat involved _ not at all involved Q54. When your division's budget is cut, to what extent are you involved in the adjustment of planned programs? very involved somewhat involved not at all involved Q65.2 How are changes in policy usually communicated to you? written correspondence orally staff meetings management not at all Corruption in the public sector Q43. In the past year have staff members in your organization been disciplined for any of the following reasons? poor work performance insubordination absence from work without leave embezzlement accepting bribes doing another job to the detriment of substantive job for lack of discipline Q68. In your opinion, to what extent is corruption a significant problem in the public sector as a whole? very significant significant somewhat significant not significant at all Q70. Page 2 in the booklet lists relationships which are prone to corruption. In your view, where is corruption most common ( if any where )? [ Please tick appropriate boxes. I officials in service delivery agencies and the public officials in regulatory agencies and private business officials with responsibilities for purchasing and private business all public officials and the public all public officials and private business public officials and their superiors or subordinates within agencies government ministers and private business members of parliament and private business other [specify] 46 Q72.5 Read page 3 of the booklet. Which of these measures do you think would encourage public officials to report corruption cases in their organizations to proper authorities? [Please tick appropriate boxes]. Certainty that the authority will follow up on the reported incidents of corruption. Protection of the identity of the public employee who reports corruption If the identity of the person reporting is known, protection from intirnidation and retaliation Clear procedures for reporting corruption Publication of public officials assets Legislation to allow investigation of any level of public officer whose assets are clearly beyond his / her income level Other [specify ] Q73. Read page 4 of the booklet. Which of these measures do you think would help to reduce corruption? [ Please tick appropriate boxes ]. better pay to public employees performance recognition schemes merit-based recruitment strengthen and support the Office of the Auditor General legislate stiffer penalties for both parties (public officials and persons)who offer bribes asset declaration by public officers other (specify) Budget management remains weak Q55. Do you think that actual funds approved for next year's budget will exceed or fall short of budgeted requirements? exceed fall short Q56. In what way do you expect that actual funds will differ from budgeted funds ? a large amount a moderate amount a small amount Q57.3 When budget cuts are made, where are they most likely to be made first? employment costs other charges capital expenditure other [specify] Q59.2. Are any penalties applied to an organization if it exceeds its budgetary authorization? yes no I do not know 47 Appendix 3 Institutional environment indicators The survey obtained verbal responses, and it was necessary to convert these to a consistent numerical scale. Qualitative responses from all questions were converted into numbers on the scale of 0 to 10. For questions having yes / no answers, the responses possible were either "O" or "10". For questions with four qualitative responses such as strongly agree (1), agree (2), disagree (3), strongly disagree (4), the following formula was used for the conversion: Scaled response = 40/3 - 10/3 (Un-scaled response).30 Thus every response on the survey was converted to a number between 0 and 10. These numbers were used to calculate rule credibility, policy credibility, resource adequacy and predictability, and eventually the institutional environment indicators. To find either rule credibility (RC) or policy credibility (PC) or resource predictability (RP), the first step was to go into the components of these three elements of institutional environment. Responses to all questions in the each box in Figure 18 were averaged. Next the average of the four boxes under RC, three boxes under PC were taken. These were the measures of RC and PC, and RP had already been obtained in the previous step. Finally, the institutional environment indicator was derived as a simple arithmetic average of the three components of the institutional environment. In more detail, rule credibility in the public sector was measured by creating an indicator covering the existence of formal rules in four areas: recruitment, training, performance appraisal, and appeal. Seven questions from the survey were utilized. These questions, as well as the details of the constructed rule credibility indicator, are listed in Tables A7 and A8. Rule credibility includes some consideration existence of the formal rules, with an eye toward the of those rules as well. Policy credibility was measured through three dimensions: whether policies were consistent; whether they were communicated properly; and whether there was no political interference/micro- management. Responses from four questions were used to calculate the policy credibility indicator. The questions and details of the constructed policy credibility indicator are listed in Tables A9 and AIO. Resource adequacy and predictability was measured by creating an indicator compounded from two questions about whether the actual funds approved for the following year will exceed or fall short of budgeted requirements. The questions used and the details of the indicator are shown in Tables A1. 30 For consistency, the affirmative responses (e.g., "useful," "helpful," "working" [as opposed to "not working"]) were converted to "10." Negative responses (e.g., "not useful," "not helpful," "not working,") were converted to "O". For example, for the question "Are job openings advertised?" "yes" was converted to "10," and "no" was converted to "O." Similarly, in the question "How consistent are the various policies your organization?' "very consistent" was converted to "10"; "more consistent than consistent" to "6.7"; "more inconsistent than consistent" to "3.3"; and "very inconsistent" to "O". 48 Using the method described in section 4. 1, as in the individual indicators, the institutional environment indicator was also constructed on a scale of 0 to 10 (O = worst, 10 = best) by taking the simple arithmetic mean of the rule credibility, policy credibility and resource adequacy and predictability indicators. The institutional environment indicator was calculated for the entire public sector and for fifteen different public sector organizations. Table A12 in Appendix 1 presents indicators for each organization and for the entire public sector in Guyana. 49 Table A 7 Questions used for calculating rule credibility in Guyana 21. Are positions like yours generally advertised to the public? Yes O No O 24. Within an organization, different people are hired for different reasons. This survey is interested in learning about general hiring trends. In your organization would you say that employees were hired more often for: almost most about fewer very none all half than few half 1. good performance at entry test O [ E E L [ 2. qualifications met job requirements Ol O O a o o 3. personal connections O Ol ] O El E 4. political connections O El O E E Ol 5. family status in community O E E E [ O 6. payment of gift to some public authorities [ El El 7. knew a senior official O [] O O E O 27. In your organization, is there a period of job/ organizational orientation before an officer is placed to function? yes El no a sometimes Ol 28. In your organization ,which of the following methods have you used to learn your job: a written procedure guide O verbal instructions from a superior [ verbal instructions from a colleague O self - taught t3 33. Does your organization have a system where annual objectives/ targets that are measurable are agreed to between employees and supervisors at the beginning of every year? yes O no E 38(a) Are there documented work/performance standards for each function in your organization? yes O no E 46. Can an employee appeal a dismissal? yes E no El I do not know E 50 Table A 8 Rule credibility indicator and its components in Guyana Recruitnent Training Evaluation Appeal CRbl Public sector 5.2 4.7 5.3 6.1 5.3 Ministries Agriculture 5.1 5.1 4.9 6.0 5.3 Education 4.9 4.0 6.6 6.3 5.4 Finance 4.4 4.8 4.7 8.3 5.6 Housing & Water 5.6 6.3 4.3 4.7 5.2 Labor & health 5.8 3.6 6.4 7.1 5.7 Works & Communication 4.0 6.5 2.3 0.5 3.3 Regional Administrations Region 2 4.3 5.3 4.8 5.8 5.1 Region 3 4.6 4.8 4.6 3.9 4.5 Region 6 6.2 4.4 5.2 5.3 5.3 Region 10 6.9 4.2 6.2 6.4 5.9 Control Bodies == == Office of Auditor General 5.2 6.0 7.8 6.0 6.2 Public service commission 4.0 6.0 5.3 7.3 5.7 Parliament office 2.9 3.7 3.7 4.0 3.6 Service Delivery Agencies _ == == Water Authority 5.8 3.5 5.3 6.0 5.1 Georgetown Sewage Commission 5.6 3.7 3.7 9.3 5.6 51 Table A 9 Questions used for calculating policy credibility in Guyana 52. In your experience do you think that employees with high political connections or who are from wealthy or prominent families are treated differently from employees who have lesser connections? much better than [ somewhat better than [ the same as persons without these connections [ 63. Agencies receive instructions and policies from different parts of the government, some complement each other, others present conflict. Overall, how do you see the relationship between these various instructions/ policies? very consistent 7 more consistent than inconsistent [l more inconsistent than consistent E very inconsistent G 64. How often do you disagree with the policies that your organization is asked to implement? often [ occasionally El rarely not at all [ 65. How are changes in policy usually communicated to you? written correspondence [l orally [l staff meetings LI management [ not at all C 67. In your opinion, how would you rate the incidents of political interference that exists in your organization? very frequently i frequently [ infrequently C! Almost never [2 52 Table A 10 Policy credibility indicator and its components in Guyana Polic consistency Policy No political micro- Policy Policy consistency communication management Credibility Public sector 6.6 4.9 6.0 5.8 Ministries Agriculture 6.2 3.1 6.6 5.3 Education 6.7 6.3 6.7 6.5 Finance 7.1 3.0 5.5 5.2 Housing & Water 6.2 5.3 5.3 5.6 Labor & health 6.8 5.6 6.7 6.4 Works & Communication 6.2 1.5 3.9 3.8 Regional Administrations Region 2 6.3 4.5 4.4 5.1 Region 3 7.2 5.7 4.9 5.9 Region 6 6.4 4.8 5.4 5.5 Region to 6.4 8.4 5.9 6.9 Control Bodi- Office of Auditor ,General 7.3 4.5 _ 7.5 6.4 Public service commission 7.1 3.3 9.2 6.5 Parliament office 7.6 4.0 9.0 6.9 Service Delivery Agencies. Water Authority 6.2 3.0 5.0 4.7 Georgetown Sewage Commission 6.2 4.7 7.2 6.0 53 Table A 11 Questions used for calculating resource adequacy and predictability in Guyana 55. Do you think that actual funds approved for next year's budget will exceed or fall short of budgeted requirements? 1. exceed 3 2. fall short O 3. other (specify] 56. In what way do you expect that actual funds will differ from budgeted Funds? 1. a large amount 3 2. a moderate amount O1 3. a small amount O 4. other 54 Table A 12 Indicator of institutional environment and its components in Guyana Rule Policy Resource Adequacy Institutional Credibility Credibility and Predictability Enviroment Public sector 5.3 5.8 5.4 5.5 Ministries Agriculture 5.3 5.3 5.3 5.3 Education 5.4 6.5 5.7 5.9 Finance 5.6 5.2 5.9 5.5 Housing & Water 5.2 5.6 6.2 5.7 Labor & health 5.7 6.4 5.3 5.8 Works & conmunication 3.3 3.8 4.7 4.0 Regional Administrations Region 2 5.1 5.1 6.4 5.5 Region 3 4.5 5.9 5.0 5.1 Region 6 5.3 5.5 5.2 5.3 Region 10 5.9 6.9 4.8 5.9 Control Bodies Office of Auditor General 6.2 6.4 7.5 6.7 Public service conmission 5.7 6.5 2.7 5.0 Parliament office 3.6 6.9 2.7 4.4 Service Delivery Agencies Water Authority 5.1 4.7 5.4 5.1 Georgetown Sewage Commission 5.6 6.0 5.2 5.6 55 Table A 13 Institutional Environment in Guyana (standardized) Rule Credibility Policy Resource adequacy & Credibility predictability Ministries Min. of Agriculture 0.15 -0.54 0.07 Min. of Education 0.35 0.86 0.41 Min. of Finance 0.50 -0.67 0.54 Min. of Housing & Water 0.07 -0.19 0.80 Min of Labor & Health 0.69 0.67 0.07 Min. of Works & Communication -2.28 -2.26 -0.38 Regional Administrations Region 2 -0.12 -0.84 0.98 Region 3 -0.85 0.15 -0.13 Region 6 0.15 -0.30 0.00 Region 10 0.95 1.28 -0.33 Control Bodies ffice of Auditor General 1.31 0.74 1.85 Public Service Commission 0.62 0.87 -2.02 Parliament office -1.98 1.23 -2.02 Service Delivery Agencies ____________ Water Authority -0.02 -1.26 0.15 Georgetown Sewage Commission 0.48 0.26 0.01 Average 0.00 0.00 0.00 Standard Deviation 1.00 1.00 1.00 56 Figure A 1 Eight dimensions of the institutional environment in the public sector of Guyana Recruitment 8 T Resource Predictability 6 Training No political micro- X E management 2Ea Policy Communication Appeal Policy Consistency 57 Figure A 2 Institutional environment in the Ministry of Works and Communication Recruitment O GUYANA 8 O works & communication Resource Predictability 6 Training No political micro- Evaluat management Policy Communication Appeal Policy Consistency 58 Figure A 3 Institutional environment in the Office of the Auditor General 13GUYANA O audit general Recruitrment 8 Resource Predictability 6 Training No political rmicro- / Evaluation mnanagernent Policy Comununication Appeal Policy Consistency 59 Appendix 4 Performance indicators Table A 14 Questions used for calculating results focus in Guyana 31 How much of this new knowledge are you now using on the job? a great deal about half of it a little none at all 38 (a) Are you aware of these standards? (b) Are they generally achieved? yes no yes no 43 In the past year have staff in your organization been disciplined for any of the following reasons? poor work performance insubordination absence from work without leave embezzlement accepting bribes doing another job to the detriment of substantive job? for lack of discipline 44 Overall, do you think these sanctions were justified? always generally occasionally almost never never 48 In the past year have staff in your organization been recognized /rewarded for any of the following reasons? Yes No taking prompt action on customers l clients/ end users' requests or complaints providing outstanding service improving qualifications excellent attendance record consistent courtesy other 49. Overall, do you think these rewards were justified? always generally occasionally almost never never 60 Table A 15 Indicator of results focus and its components in Guyana Geared Towards Efficiency Merit-Based Results-Focus Objectives Incentives Public sector 4.2 5.4 4.2 4.6 Ministries Agriculture 3.7 3.3 3.8 3.6 Education 4.8 4.3 4.9 4.7 Finance 5.0 4.6 3.6 4.4 Housing & Water 3.3 6.0 3.3 4.2 Labor & Health 4.5 5.8 3.2 4.5 Works & Communication 1.3 2.7 2.3 2.1 Regional Administrations Region 2 3.2 4.8 5.5 4.5 Region 3 5.0 7.5 5.2 5.9 Region 6 3.8 5.2 3.9 4.3 Region 10 4.6 5.6 4.6 4.9 Control Bodies _ _ Office of Auditor General 5.5 6.7 6.4 6.2 Public service commission 4.7 7.1 5.8 5.8 Parliament office 4.0 9.1 2.4 5.2 ervice Delivery Agencies ater Authority 4.5 6.0 5.6 5.4 eorgetown Sewage ommission 4.0 6.2 6.5 5.6 61 Table A 16 Questions used to calculate accountability indicator in Guyana 25 Before you applied for your current job or when you first joined the government, were you assured that you would get the job? yes no 31. How much of this new knowledge are you now using on the job? a great deal about half of it a little none at all 34 When was your performance last appraised by your supervisor? last quarter mid year end of first quarter one year ago two years ago three years ago more than three years My performance was not appraised 39 Are you allowed to make any decisions relating to the performance of your duties? I seldom need to refer decisions to my boss I refer half of the decisions that need to be made to my boss I refer most of the decisions that need to be made to my boss Any decision that is required is made by my boss 40 Do you think that there is need for divisional heads to have more authority in their areas of work in relation to reward and discipline staff? a lot more the present level is adequate a little more I am uncertain 42 How difficult is it to obtain adequate and timely information from the records management system in your organization?? very difficult difficult easy very easy Public opinion seems to indicate that one of the main problems affecting the performance of the government and some of its organizations is corruption. 67. In your opinion, to what extent is corruption a significant problem in the public sector as a whole? very significant significant somewhat significant not significant at all 71 How often are cases of corruption, generally, reported to the proper authorities? almost always frequently occasionally almost never 62 Table A 17 Accountability indicator and its components in Guyana Enforceability of Delegation Corruption Accountability Regulations Public sector 5.4 6.1 3.7 5.1 Ministries Agriculture 5.7 5.6 4.0 5.1 Education 5.1 6.8 4.1 5.4 Finance 4.5 7.0 4.7 5.4 Housing & Water 4.1 4.0 2.3 3.5 Labor & Health 5.3 7.8 3.7 5.6 Works & Communication 4.0 4.3 3.1 3.8 Regional Administrations Region 2 5.9 6.3 5.3 5.8 Region 3 6.0 6.1 4.5 5.5 _Region 6 5.8 6.0 3.6 5.1 R _egion lO T 5.3 5.7 2.7 4.6 Control Bodies _ _ __ - Office of Auditor General 6.2 5.2 2.5 4.6 Public service commission 5.3 4.0 3.3 4.2 Parliament office 5.0 4.0 1.1 3.4 Service Delivery Agencies __= Water Authority 5.3 6.8 4.1 5.4 eorgetown Sewage Commission 6.0 7.8 3.4 5.7 63 Table A 18 Questions used for calculating employee morale in Guyana 16 Is your salary sufficient to meet your living expenses? yes no 18 Would you describe the quality of life that you have maintained over the past year as unacceptable, acceptable, or good? unacceptable acceptable good 20 During periods of economic difficulty and austerity, some people talk about decreasing the size of the government as a means of saving money. Decreasing the size of the government would, in some areas, entail organization streamlining and staff cutbacks. Given that, how worried are you about losing your job sometime in the near future? are you very worried, somewhat worried, or not at all worried? very worried somewhat worried not at all worried 43 How often do you receive salary or wages late? very often sometimes a few times no time at all 64 Table A 19 Employee morale indicator and its components in Guyana Salary Quality of Life Job Security mployee Morale Public sector 1.5 5.4 4.8 3.9 Ministries Agriculture 1.7 5.1 4.0 3.6 Education 1.6 5.1 5.9 4.2 Finance 1.1 5.5 4.0 3.5 Housing & Water 0.6 2.3 4.0 2.3 Labor & Health 1.2 4.9 6.3 4.1 Works & Communication 1.3 4.0 4.8 3.4 egional Administrations Region 2 1.6 5.5 4.2 3.8 Region 3 1.9 6.3 4.6 4.3 Region 6 1.1 6.3 4.5 3.9 Region 10 2.1 5.2 3.4 3.6 Control Bodies ___ _ _ _ _ _ _ _ _ _ _ _ _ Office of Auditor General 1.9 6.3 6.8 5.0 Public service commnission 0.9 7.0 3.7 3.9 Parliament office 2.1 5.7 3.3 3.7 ervice Delivery Agencies ater Authority 2.5 6.3 5.8 4.8 eorgetown Sewage ommission 1.8 5.7 3.7 3.7 65 Table A 20 Indicator of performance and its components in Guyana Results-Focus Accountability Employee Performnance Morale Public sector 4.6 5.1 3.9 4.5 Ministries Agriculture 3.6 5.1 3.6 4.1 Education 4.7 5.4 4.2 4.7 Finance 4.4 5.4 3.5 4.4 Housing & Water 4.2 3.5 2.3 3.3 Labor & Health 4.5 5.6 4.1 4.7 2.1 3.8 3.4 3.1 Works & Communication Regional Administrations Region 2 0 4.5 5.8 3.8 4.7 Region 3 5.9 5.5 4.3 5.2 Region 6 4.3 5.1 3.9 4.4 Region 10 ___ _ 4.9 4.6 3.6 4.4 Control Bodies Office of Auditor General 6.2 4.6 5.0 5.3 5.8 4.2 3.9 4.6 Public service commission 5.8 4.2_3.9_4.6 Parliament office 5.2 3.4 3.7 4.1 ervice Delivery Agencies _ ater Authority 5.4 5.4 4.8 5.2 eorgetown Sewage 5.6 5.7 3.7 5.0 Comnmssion 66 Appendix 5 Connection of performance and institutional environment Figure A 4 The relationship between institutional environment and results-focus in Guyana 6.5 Results focus =0.78 IE + 0.55 6 r=0.49 Region 3 Auditor general Public service 5.5 - ~~~~~~commission Sewage 5.5 * ~~~~ ~ ~ ~~~~~Water/ * Parliament office 5 -+ Rgon 10 o2 Min. of education ; 4.5 Min. of Housi Min of labor & health W r Min. of finance S 4 - Region 6 3.5 - Min. of agriculture 3- 2.5 Min. of works & communication 2 , 3 3.5 4 4.5 5 5.5 6 6.5 7 INSTITUTIONAL ENVIRONMENT(IE) 67 Figure A 5 The relationship between institutional environment and accountability in Guyana 6.00 - Accountability 0.62 IE + 1.55 Region 2 * Sewage r=-0.49 Region 3 *+ Min of labor & het 5.50 * Min. of finance * Water * * M.oeducation 5.00 - 4> <116gion 6Auditor general *Region 10 4.50- Public service / ~~~~~commission 4.00 - Min. of works & communication 3.50 - Min. of Housing & * Parliament office Water 3.00 - I I 3 3.5 4 4.5 5 5.5 6 6.5 7 INSTITUTIONAL ENVIRONMENT (IE) 68 Figure A 6 The relationship between institutional environment and employee morale in Guyana 5.5 Employee Morale = 0.39 IE + 1.74 r=.41 Auditor ger eral 5 * Water Min. of education 4 PUblicseruce * ~~~~~~~Region 3 / o commission . of labor & health Min. of works & Region 2 communication P mMin. Ifinance 3. - Min. of agriculture Region 10 Sewage 3 2.5 Min. of Housing & Water 2 , 3 3.5 4 4.5 5 5.5 6 6.5 7 INSTITUTIONAL ENVIRONMENT (IE) 69 Appendix 6 Econometic and analytical issues This appendix has four sections. Section A6. 1 presents the econometric models. Section A6.2 discusses the data and estimation problems and describes how these problems were tackled. Section A6.3 includes the estimation results for the entire public sector of Guyana. Section A6.4 briefly explains the construction of the Performance Pay-Offs for Guyana. Econometric models to estimate Econometric Model I: Yij= a + b EE + ei, where Y = performance indicator, with j = aggregate performance, accountability, employee morale, and results focus; IE = institutional environment; and e = a well-behaved stochastic error term. A linear functional form was chosen to keep the analysis simple. This model was estimated by using data points from 15 different public organizations in Guyana. The estimations results are presented in Section 6 and in Appendix 3. Econometric Model II: II Yj = IA XJk +uj k =1 where, Yj = performance-j, with j = accountability (ACC), employee morale (MOR), and results-focus (RFO); X k= component-k of the institutional environment, with k= 1,2, ..., 1 1; and uj= a classical error term. In particular, xl = Existence of rules in recruitment (Q24) x2 = Existence of rules in training- 1 (Q29) x3 = Existence of rules in performance appraisal- I (Q33) x4 = Existence of rules in performance appraisal-2 (Q38a) x5 = Existence of rules in training-2(Q28) 70 x6 = Existence of rules in appeal (Q46) x7 = Policy consistency (Q63) x8 = Policy communication (Q65) x9 = Political interference/micro-management (Q67) xlO = Resource adequacy & predictability - 1 (Q55) xl I = Resource adequacy & predictability - 2 (Q56) Dealing with data and estimation problems Small number of observations In model II, having 11 independent variables (and a constant term), and only 15 organizations, i.e., data points, was a problem. In order to calculate PPOs, responses from each public official were utilized in running regressions. This essentially gave (after some data cleaning) 464 observation points for the entire Guyana. High level of correlation among independent variables Explanatory variables were transformed into binary responses: an indicator with results lower than 5 out of 10 points were converted to "0", otherwise to "1." This calibration also allowed the interpretation of the estimated coefficients in a more sensible way. Instead of referring to increasing policy credibility by one or by a certain amount, it was possible to refer to making policies credible. Similarly, instead of referring to two public officials who believe that rules in place 72.4% or 39.8%, we could refer to two public officials who believe and don't believe respectively that rules are in place. Table A 21 Correlation coefficients for the (converted) institutional environment indicators for Guyana XI! xl x2 x3 x4 x5 x6 x7 x8 x9 x1O xll xl 1.00 _ x2 0.09 1.00 x3 0.16 0.17 1.00_ ___ x4 0.05 0.19 0.28 1.00 - - xS 0.17 0.13 0.19 0.16 1.00 x6 0.10 0.14 0.17 0.13 0.00 1.00 - - - x7 0.07 0.07 0.05 0.15 0.11 0.02 1.00 - x8 0.06 0.19 0.09 0.11 0.00 0.14 0.07 1.00 x9 0.13 0.05 0.07 0.04 0.17 0.09 0.17 0.06 1.00 x1O -0.02 0.03 0.00 -0.13 -0.06 0.04 -0.13 0.08 -0.04 1.00 xll -0.03 0.01 0.00 0.04 0.03 -0.02 0.16 0.03 0.04 -0.23 1.00 71 Correlation among the error terms of different performance regression equations In the left hand side of Model II, there are three specific performance indicators, namely results-focus (RF) accountability (ACC), and morale (MOR) as a function of eleven different aspects of the institutional environment (LE). In other words, we are saying that much of the systematic component of these three elements will consist of the same type of variation-variation due to aspects of the institutional environment. But, it is also likely because of the matching across public officials that random components of the performances will be related. Thus, some knowledge of the random component of RF variations would give us some predictive insight into the random component of ACC variations. Consequently, it is reasonable to expect that the errors of these three regression equations-RF=a(IE), ACC=v(IIE), MOR=c(EE)-may be correlated across equations. However, when the errors are correlated across the equations, OLS results in biased variance estimates. Therefore, to improve efficiency, Seemingly Unrelated Regression Equations (SURE) approach was used in the estimations. If the errors of the equations were not correlated, then SURE results and OLS results became the same. 72 Table A 22 SURE estimation results for the Guyana's public sector Estimates for equation: Results-focus N=454 Variable Coefficient Standard Error z=b/s.e. P[IZK_Z] Mean of X Constant 2.373531 0.37428 6.342 0.00000 Q24 0.9389700E-01 0.20076 0.468 0.63999 0.6616 Q29 0.6075911 0.19375 3.136 0.00171 0.4181 Q33 0.4840812 0.19942 2.427 0.01521 0.5582 Q38A 1.349764 0.19868 6.794 0.00000 0.5108 Q28 0.3066279 0.19376 1.583 0.11353 0.4806 Q46 0.1952959 0.19583 0.997 0.31863 0.6078 Q63 0.5973676 0.22031 2.711 0.00670 0.7457 Q65 0.6764702 0.18898 3.580 0.00034 0.4871 Q67 0.3284515 0.19360 1.697 0.08978 0.5862 Q55 -0.1428734 0.22522 -0.634 0.52584 0.7608 Q56 -0.2787939 0.22066 -1.263 0.20643 0.7522 Model test: F[ 11, 451] = 14.64, Prob value 0.00000 Estimates for equation: Accountability Variable Coefficient Standard Error z=b/s.e. P[IZL_z] Mean of X Constant 3.116571 0.26232 11.881 0.00000 Q24 0.4253304 0.14070 3.023 0.00250 0.6616 Q29 -0.1115887 0.13579 -0.822 0.41122 0.4181 Q33 0.2979080 0.1:3977 2.131 0.03305 0.5582 Q38A 0.1822602 0.13925 1.309 0.19058 0.5108 Q28 0.3734510E-01 0.13580 0.275 0.78331 0.4806 Q46 0.1404441E-02 0.13725 0.010 0.99184 0.6078 Q63 0.5988795 0.15441 3.879 0.00011 0.7457 Q65 0.4731137 0.13245 3.572 0.00035 0.4871 Q67 0.4702702 0.13568 3.466 0.00053 0.5862 Q55 -0.7553748E-01 0.15785 -0.479 0.63226 0.7608 Q56 0.2286695E-02 0.15466 0.015 0.98820 0.7522 Model test: F[ 11, 451] = 7.66, Prob value = 0.00000 Estimates for equation: Employee Morale Variable Coefficient Standard Error z=b/s.e. P[jZI_z] Mean of X Constant 4.140896 0.39190 10.566 0.00000 Q24 0.1365675 0.21021 0.650 0.51590 0.6616 Q29 0.4242991E-01 0.20287 0.209 0.83434 0.4181 Q33 0.6101321E-01 0.20881 0.292 0.77014 0.5582 Q38A -0.2513755 0.20804 -1.208 0.22692 0.5108 Q28 -0.1948372 0.20288 -0.960 0.33687 0.4806 Q46 0.7254887E-01 0.20505 0.354 0.72348 0.6078 Q63 0.2715829 0.23068 1.177 0.23908 0.7457 Q65 0.2406922 0.19788 1.216 0.22384 0.4871 Q67 0.4025840 0.20271 1.986 0.04703 0.5862 Q55 0.2875617E-01 0.23582 0.122 0.90295 0.7608 Q56 -0.1034993 0.23105 -0.448 0.65419 0.7522 Model test: F[ 11, 451] = 1.01, Prob value = 0.4401 73 Constructing the indicatorsforpay-offs The following is a demonstration of how a PPO was constructed by using the estimated coefficients-which were reported in the previous section. Based on the following formula, which was explained in section 7, particularly for policy consistency, two pieces of information were required to construct a specific PPO. A performancelApolicy consistency PPc~policyconsistency perfo rmance In general, to construct Results-focus PPOs (1) We need estimated partial derivatives of the results-focus with respect to particular potential reform interventions-i.e., the coefficient of the related variable from Model II. Yet, for statistical significance of the constructed PPO, only the estimated coefficients which were statistically significant at 0.05 for one-tailed test were used in the construction of the indicators. (2) We need the initial level of the results-focus indicator. (3) We need the initial level of the particular component of the institutional environment. As the reported regression results show, six of the estimated coefficients in the results- focus equation were statistically significant for one-tailed test. The initial level of the result focus-indicator was 4.56. For instance the Results focus-PPO of "defining/disseminating annual organizational objectives/targets" were constructed as shown in the following table. Table A 23 Mechanics of calculating the PPOs Institutional a (results - focus) Initial level of Initial level environmentk a (institutional environmentk, 'defining/dissemin of results Results- ating annual focus focus- organizational PPOk objectives/targets' Defining/dissemi 1.35 5.11 4.56 14.5% nating annual organizational objectives/targets _ 74 Distributors of World Bank Group Publications Pnces and credit terms vary from CZECH REPUBLIC INDIA Eulyoo Poblishing Co. Ud PERU SWEDEN country to counUty. Consu your USIS, NIS Prodejna Ahied Publishers Ltd. 46-1, Susong-Dong Editonal Desarrollo SA Wennergren-Williams AB focal istributor before placing as Havelkova 22 751 Mount Road Jongro-Gu Apartado 3824, Ica 242 OF. 106 P 0. 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Pak Book Corporation 100, Sir Chittampaam Gardiner 6,u iogenes 20 Euro Info Service Intemational Division Aziz Cnambers 21, uesn's Pnad Mawatha N,.iox 2006 Maraitszaeti Europa Haz 783-20, Pangba BonrDong, Lahore coio,-bo 2 Tel: (3572)59-0730 TelH 8 oudapest Socho-ku Tel: (92 42) 636 3222: 636 0885 Tel: (941) 32105 Fat: (357 2) 66-2051 Tel: (361) 3508024, 350 80 25 Seoul Fax: (92 42) 636 2328 Fax: (941) 432104 Fax: (36 1) 350 90 32 Tel: (82 2) 536-9555 E-mail: pbc@brain.netpk E-mail: LHL@-sri.lanka.net E-mail: euroinfo(aa.lmatav.hu Fax: (82 2) 536-0025 E-mail: seamap0chollian.net Recent World Bank Technical Papers (continued) No. 454 Gordon Hughes and Julia Bucknall, Poland: Complying with EU Environmental Legislature No. 455 Dale F. 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