Institutional inefficiency in public organisations

The golden rule of efficiency is the maximisation of output and the minimisation of waste. Bureaucracies are generally credited with being inefficient. Often a lack of resources is cited as one reason and a lack of accountability as another for below par performance of government administrations. A third area, often overlooked, is institutional inefficiencies in the public sector. Design of the organisational structure is an important determinant of this type of inefficiency.

As resources are scarce, prudence demands that the government spend every buck for the bang that it gets. That means for every rupee spent on the administrative machinery, the government must get useful return in exchange. The difficult part is how to quantify the costs and benefits of tasks undertaken in the public sector. For a private sector entity it is very easy to quantity efficiency by minimising cost and maximising production. The result comes in a concrete form, ie, sales and profit which are excellent indicators of the fact that the firm is meeting its bottom line.

In the public sector, this bottom line is either missing or difficult to establish. For example, the Federal Board of Revenue is the earning arm of the government. All the rest of the departments are the consumers of taxes collected by FBR. The Ministry of Finance allocates the collected funds to different ministries for meeting their operational costs. The departments working under the ministries then utilise these funds to carry out their functions. The police department uses its budget to maintain law and order in society, the health department provides medical services to the public and the education department runs schools for children. All these are public services which collectively benefit society in the shape of safe, secure living and a healthy, educated citizenry.

The benefits of public programmes are, therefore, indirect as there are no sales or profits which accrue to the government. One way to gauge the efficiency of a government department is to measure the impact of its work on the target community. Is the community safe or is crime increasing day by day? Are people getting quality education and health services or are they forced to resort to expensive private hospitals and schools for these services? This ‘inside-out’ approach towards installing a feedback mechanism to evaluate the benefits of a public programme and make improvements and modifications along the way as necessary remains missing from the government enterprises. Resultantly, the resources are devoted and used but the return on investment either remains zero or unquantified.

A second way to measure government efficiency is to take the cost minimisation approach. It involves an assessment of the type and quantity of resources employed by the government to carry out its functions. Resources can be broadly categorised as human and physical. The physical resources include items like government infrastructure, buildings, offices, equipment, etc. The human resources are obviously the workforce, ie, the bureaucracy. Invariably all departments in the public sector always complain of the lack of funding and resources to carry out their work attributing a lack of ‘efficiency’ to limited resources. But in reality, resources are always going to be limited. The skill is to utilise the minimal resources with the maximum efficiency. The failure of bureaucracy usually lies in this part; its inability to assess its own efficient functioning – the ‘outside-in’ analysis.

For producing maximum output, the human and physical resources must be efficiently allocated to minimise waste. This requires that each office, department or in more general terms we may call it a work unit, must be so designed that all personnel employed contribute in producing the overall output of the organisation coupled with the availability of minimum tools (resources) that are required to perform their job. In reality, we usually see that multiple agencies and organisations are created with overlapping functions. The personnel in such departments remain at loggerheads with each other most of the time over jurisdiction and authority which wastes precious time. It is also double allocation of resources to the same task. The net result is inefficient division of resources resulting in poor performance of such institutions and unnecessary costs for the government.

Sometimes work units are demarcated on functional lines to achieve task specialisation. Like creation of support units, eg, a research department, a human resource department or an information technology department within a large public sector organisation. The support units are then staffed with regular personnel of the department who may have work related expertise like conducting audits and investigations, calculating tax assessments or experts in technical work but may not have the particular skill sets needed for these specialised support functions. The result is misallocation of resources by selecting the wrong man for the wrong job. More particularly, there is no clear understanding of what benefit in terms of output shall accrue to the respective organisation by the creation of such units. After all, if staff and funds are to be devoted to a task then it must have some quantifiable benefits. Over a period of time, these places become dumping places for ‘unwanted’ personnel within the organisation and a breeding ground for disgruntled and demotivated staff. Because no useful work appears to get done, fund allocation also dwindles over a period of time while the unit continues to exist like a festering wound which never heals.

In some instances, the departmental work load is not evenly divided between various work units, some staff are over-worked while others are underworked. The former can never fully complete the tasks that are assigned to them as it is beyond their human capacity. The latter start procrastinating and eventually stop attending work altogether. This phenomenon is so common that some bureaucrats claim that these positions are for ‘relaxation’ only, meaning that there is no pressure to produce any output and nobody cares whether anyone is coming to work or not. Then there are positions which seem to have been created in excess of departmental requirements and have no significant work allotted to them. Again many such positions may remain vacant because some percentage of the departmental workforce is either on deputation to other departments, or on long leave or on training. People who do get posted in such places often enjoy a paid holiday. Of course, all this happens at the public expense.

Efficiency in the public sector thus gets compromised due to an inefficient organisational structure. The badly designed work units are allocated an annual budget and the staff posted in these units continuously paid salaries but the government does not get any output in return. The result is sheer wastage of precious human and physical resources. Over a period of time, apathy sets in to the extent that no one desires to change the ‘status quo’. Compare this to the private sector where every last person employed in the firm is held accountable for the quality and quantity of work assigned. Each position is created and abolished on need basis only.

The ballooning public sector operational cost demands that bureaucracy controls the institutional inefficiencies prevalent in the public sector. It can conduct an internal appraisal in each department which begins with the identification of all costs and functions which have become redundant over a period of time and are producing zero output. Next deliberations should go into deciding whether they need to be weeded out altogether or would benefit from structural redesigning. This will require some innovative thinking. The process of designing or redesigning, whatever one may wish to call it, must necessarily involve assigning quantitative and qualitative criteria to measure the output of each function. Alternative proposals for resource allocation should be discussed and compared viz. a viz. the impact a particular public program is intended to generate on the target community. Finally, the proposal most likely to produce the best outcome for achieving departmental objectives must be selected for adoption. Doing so can result in freeing up human and physical resources from redundant positions and functions and divert them to alternative more efficient uses. A significant cost reduction for the government’s budget can result through this exercise. In the process, it will create opportunity to align the output of each public sector organisation with its overall objective and to maximise the impact of government policy or program which that organisation is responsible to run.