Friday, March 14, 2008

Reforms in administration

In my first post, I had dwelt on the wisdom of Jim Collins' book 'Good to Great', where he argues that to create a good company you need to "get the right people on the bus, wrong people off the bus, right people on right places and then figure out where to drive the bus".

At the Vijayawada Municipal Corporation (VMC), over the past two years we have been trying out this approach in the public health (sanitation) and tax collection departments. The City is divided into sanitary divisions headed by a Sanitary Inspector (SI), with public health workers under him. The tax collection establishment is divided into revenue divisions, each headed by a Bill Collector (BC). Both the SI and BC are at the cutting edge of their respective work - the SI being responsible for supervising road and drain cleaning work done by the public health workers and the BC responsible for facilitating and monitoring tax collection.

A detailed analysis of both departments revealed both administrative excess and human resource deadwood, at the cutting edge. The numbers of sanitation and revenue divisions were found to be on the higher side. Given the difficulty in hiving off or retrenching staff in Government, we decided to have two buses - with all the right people in one bus and all the wrong people in the other bus.

Artificial administrative constructs that fail to take into account the reality of available resources and the changing nature of work practices and approaches are common place in Government. Most such administrative arrangements and work distribution have been put in place in response to demands other than the specific work requirements (like providing employment, promotion channels, need for a state wide standard etc). Further, these arrangements are made on low or below average productivity assumptions. Apart from not incentivizing anybody, it even disincentivizes the more active and efficient officials. This lack of flexibility results in highly inefficient allocation of work, thereby adversely affecting the desired outcomes. For example, highly capable and efficient Bill Collectors or Sanitary Inspectors, end up having the same work distribution as the inefficient and weak. The system gets trapped in an inefficiency spiral.

It was therefore decided to bite the bullet and completely re-organize the sanitation and taxation administrative machinery. The number of sanitation divisions was reduced from 45 to 34, and revenue divisions from 72 to 36, taking into account the field conditions and work convenience, and the availability of capable officials. The divisions were also allocated based on the efficiency and professionalism of the individual SIs and BCs, following a transparent process.

The remaining Bill Collectors were organized into enforcement teams and used for other miscellaneous non-core work. The remaining SIs were diverted to Malaria and other regularly allotted group work. They were given the incentive of getting posted back as a BC or SI, depending on their performance and conduct. The poor performing BCs and SIs in the first bus had the threat of demotion to the second bus, acting as a major incentive to maintain high work standards.

The first bus was populated by the core group of SIs and BCs, while the second bus contained the rest. The staff and the seating in the first bus was carefully chosen, keeping in mind the specific local requirements. The performance of the first bus determined the performance of the department, and was hence the focus of all the attention. In the absence of all the poor performers, the average performance standards of the second bus rose significantly and the internal incetive structures made the bus even more competitive. The second bus was no longer a drag on the performance of the department.

The results have been spectacular. Revenue collection efficiency has gone past 90% (used to be 75-80% previously), and the large private defaulters have all paid their dues. Tax revenues have increased by more than 60% since the experiment has been tried out. The revenue assessment, collection, and monitoring work has become more professional and standardized. The sanitation complaints reflected in a toll free complaints cell, 103, has declined sharply and this has been acknowledged by the City receiving the CRISIL award for sanitation in 2007. The trade licence issuance and fee collection has improved dramatically. While all of these improvements are surely not exclusively the result of the administrative revamp, it is undeniable that it has contributed a substantial share towards improving the performance.

This revamped sanitation and tax collection administrative arrangement immediately spurred productivity and efficiency improvements in many ways.
1. The larger administrative units ensured that the SIs and BCs had to innovate on process reforms and their work practices, so as to cover the increased areas.
2. The larger administrative areas and the peer acknowledgement at being chosen over their under-performing colleagues, provided a positive stimulus to them.
3. It lowered the administration costs in terms of supervising and monitoring, as the processes and scope became simpler and therefore more meaningful.
4. The under performing divisions fell sharply, as the poor and weak were phased out.
5. The average work standards were raised substantially in a single stroke. This also increased the performance related peer reference level for employees.
6. The SIs and BCs could now concentrate on their core work, while those on standby were utilized for the miscellanoeus work, which gets entrusted frequently by the Government.
7. The poor and weak SIs and BCs were no longer adversely influencing the performance of the department and on the better performing employees.
8. The smaller numbers also meant that peer effects were now much more positive and their infleunce on each member was substantial.

In many respects, we therefore have two buses. The primary bus populated by all the efficient employees and being driven to its destination through the collective efforts of all its occupants. The secondary bus follows the primary one, and serves as a standby to supply spare parts and other support when the primary bus experiences problems. While this two bus approach may not be suitable (due to inherent bureaucratic rigidities) in many government departments, they illustrate the influence of competitive pressures and motivation on employee performance.

3 comments:

skthewimp said...

how have the poorly performing guys (who are now in the "second bus") reacted to this?

i'm sure that due to the reallocation of work, these guys will be losing out on a lot of "rent" that they used to collect earlier. aren't they cribbing?

hasn't there been any pressure to transfer you because of this?

gulzar said...

yes, the rents dried up. And not just for the affected employees, but for all those depedendent on them - corporators, local news reporters, higher officials in the sanitation and taxation departments etc. Corporators and the Council objected to the reforms arguing that it would adveresely affect sanitation and revenue collection. The news paper reports gave wide publicity to these opposition. Internally too, many officials were apprehensive of such radical shifts. That the opposition was fairly intense, was the surest testimony to the huge rents involved.

Some ground work, and the presence of a few internal champions for change, especially those benefitting from these changes, helped push through the reforms.

For more on the dynamics of such corruption, read this link
http://gulzar05.blogspot.com/2007/01/recession-in-rent-seeking-economy.html

Karthik said...

i'm pleasantly surprised you managed to find enough internal champions for change.

what i've read/heard about corruption is that the losers lose small and are dispersed, while the winners are concentrated and have much higher stakes and thus much higher incentives. and hence reforms are easy to stall.

where did you find the champions for change? within the organization? were they powerful enough?

and i notice you mention local news reporters as losers in the reform process. can you elaborate on that? maybe you could do a separate post on the media and its role in such matters