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COMPARATIVE RESEARCH

CHALLENGES FOR PUBLIC SECTOR HUMAN RESOURCES MANAGEMENT IN THE RECENT ECONOMIC DOWNTURN

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

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This publication was produced by the Regional Centre for Public Administration Reform of UNDP Bratislava Regional Centre, www.rcpar.org September 2010 Author: Katri Vintisa, MPA Advisor and coordinator: Nenad Rava, Network Facilitator, RCPAR Contributors: Vuqar Askerov (Azerbaijan), Sanja Jelic (Bosnia and Herzegovina), Margus Sarapuu and Liina Simm (Estonia), Hortenzia Hosszu and Richrd Adorjn (Hungary), Baiba Medvecka and Valrijs Stris (Latvia), Laima Tuleikien and Jurgita Siugzdiniene (Lithuania), Tamara Gheorghita (Moldova), Bojana Jankovi and Desanka Duran (Serbia), Aleksandar Golev (the former Yugoslav Republic of Macedonia), Maksym Subota (Ukraine). Editor: Anne Caroline Tveoy, Policy Specialist, RCPAR For more information, please contact Panos Liverakos, Team Leader, RCPAR, panos.liverakos@undp.org

The United Nations Development Programme (UNDP) is the UNs global development network, advocating change and connecting countries to knowledge, experience and resources to help people build a better life. The views expressed in this publication are those of the author and do not necessarily represent those of the United Nations, including UNDP, or their Member States.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

UNDP Regional Centre for Public Administration Reform (RCPAR)


The Regional Centre for Public Administration Reform is a five-year regional project launched by the United Nations Development Programme, Bratislava Regional Centre and primarily financed by the Hellenic Government. Through multi-country initiatives generated by network members, the Project aims at facilitating professional networking and cooperation between the countries in the region of Central and Eastern Europe and the Commonwealth of Independent States. Thematically, the Regional Centre focuses on strengthening capacities for policy-making and coordination; improving public finance management; enhancing organization and staffing in the public sector; and promoting public service delivery. The network of focal points, consisting of government entities, academic institutions and nongovernmental organisations from the countries in the region, is one of the cornerstones of the Regional Centre for Public Administration Reform. A systematic effort to expand the network is an ongoing process. In each country, the aim is to engage a government institution responsible for coordination of the national public administration reform efforts, as well as a set of Focal Points in each of the thematic areas. Although there is an emphasis on government entities, and middle and high level civil servants, who constitute around 80% of the current contact persons in the network, non-governmental organizations and academic institutions are also included. Through its philosophy, design and operational mechanisms, the Project offers significant opportunities for countries in the region to engage in the formulation and implementation of multicountry activities (MCA) funded by the Centre. Network members are actively encouraged to propose ideas and develop proposals, involving a minimum of three countries from the region, within one of the thematic areas. The funding available for each initiative is around US$100,000 and the Project aims at generating at least six initiatives per year. Application guidelines and templates have been distributed widely in the network; they are also publicly available at www.rcpar.org. Set up under the central UNDP online collaborative work platform, the Project operates a workspace which was launched in June 2009. Its purpose is to provide a virtual meeting place for members of the Network of Focal Points. By enabling members to launch or participate in online discussions, and use a variety of tools to share experiences and documents, the aim is to facilitate the generation of multi-country proposals and produce a large base of documentation and knowledge.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

ABREVIATIONS AND ACRONYMS


CV EIPA EU EUR GDP HR HRM IMF IQ NGO MCA MoF OECD RCPAR SIGMA UNDP WB Curriculum Vitae European Institute of Public Administration European Union Euro Gross domestic product Human resources Human resources management International Monetary Fund Intelligence quotient Non-governmental organisation Multi-country activities Ministry of Finance Organisation for Economic Co-operation and Development Regional Centre for Public Administration Reform Support for Improvement in Governance and Management United Nations Development Programme World Bank

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

CONTENTS
UNDP Regional Centre for Public Administration Reform (RCPAR) .......................................... - 3 ABREVIATIONS AND ACRONYMS .......................................................................................... - 4 CONTENTS ........... - 5 I ACKNOWLEDGEMENTS ................................................................................................ - 6 II EXECUTIVE SUMMARY ................................................................................................. - 7 III INTRODUCTION ............................................................................................................. - 9 III.1 Purpose ................................................................................................................. - 9 III.2 Scope .................................................................................................................... - 9 III.3 Research tools .................................................................................................... - 10 III.4 Core topics .......................................................................................................... - 10 IV FINDINGS ........... - 12 IV.1 Public sector cost cutting and downsizing measures........................................... - 12 IV.2 Transformation of the civil service ....................................................................... - 14 IV.3 Human resources management measures.......................................................... - 17 IV.4 Changes in HRM policy planning and implementation practice ........................... - 22 IV.5 Communication policies....................................................................................... - 26 IV.6 Impact of crisis on the motivation of civil servants and development of public service in the longer term ................................................................................................ - 27 V COMPARATIVE ANALYSIS .......................................................................................... - 29 V.1 Approach to public sector cost cutting and downsizing ....................................... - 29 V.2 VI Trends of civil service transformation .................................................................. - 29 Strategic human resources management development ................................................. - 31 VI.1 Changes in HRM policy planning and implementation ........................................ - 31 VI.2 Communication during crisis ............................................................................... - 33 VI.3 Motivation, innovation and the possible impact of the crisis in the longer term ... - 33 VII VIII IX CONCLUSIONS AND LESSONS LEARNED ................................................................ - 34 REFERENCES .............................................................................................................. - 36 APPENDIX: SURVEY QUESTIONNAIRE ..................................................................... - 37 -

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

ACKNOWLEDGEMENTS

The preparation of this paper benefited from the input of many people. In particular, I would like to thank representatives of the individuals and institutions participating in the study: public sector HRM professionals Vuqar Askerov (Azerbaijan), Sanja Jelic (Bosnia and Herzegovina), Margus Sarapuu and Liina Simm (Estonia), Hortenzia Hosszu and Richrd Adorjn (Hungary), Baiba Medvecka and Valrijs Stris (Latvia), Laima Tuleikien and Jurgita Siugzdiniene (Lithuania), Tamara Gheorghita (Moldova), Bojana Jankovi and Desanka Duran (Serbia), Aleksandar Golev (The former Yugoslav Republic of Macedonia), and Maksym Subota (Ukraine). Special thanks goes to the distinguished contributors to the seminar on impact and challenges of the economic crisis on human resources management in the public sector in Tallinn, 4 and 5 February 2010: keynote speakers Professor Tiina Randma-Liiv (Tallinn Technical University, Estonia), Dr. Niamh Hardiman (University College Dublin, Ireland), Margret Bjornsdottir (University of Reykjavik, Iceland), moderator of the seminar Annika Uudelepp (Estonia) and independent consultant Damir Ahmetovic (Bosnia and Herzegovina). The report was prepared under the general guidance and advice of UNDP/RCPAR and the two partners in the activity, the Ministry of Finance of Estonia and the State Chancellery of Latvia. I am grateful for valuable suggestions and constant support from Nenad Rava and Anne Caroline Tvey (RCPAR), Karin and Reelika Vljaru (Ministry of Finance of Estonia), and Inese Vaivare (State Chancellery of Latvia).

Katri Vintia March 2010

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

II

EXECUTIVE SUMMARY

This paper presents a comparative analysis of the current challenges facing public sector human resources management (hereinafter referred to as HRM) in selected countries of the region, in the context of the global economic downturn. This crisis has affected the countries in Central and Eastern Europe unevenly. The report compares challenges and responses in Azerbaijan, Bosnia and Herzegovina, Estonia, Hungary, Latvia, Lithuania, Moldova, Serbia, the former Yugoslav Republic of Macedonia, and Ukraine, which were all represented at the seminar on the impact and challenges of the economic crisis on human resources management in the public sector in Tallinn, 4 and 5 February 2010. The main purpose of the research has been to consolidate experiences and lessons learned, focusing on current challenges posed by the crisis and the possible impact on HRM, now and in the future. The research puts emphasis on changes in HRM practices which may have been prompted by, and directly or indirectly affected by the crisis. The report consists of three main chapters: [1] factual findings, based on input provided by the representatives of countries participating in the survey; [2] a comparative analysis of country cases; and [3] conclusions and lessons learned. The research is based mainly on the opinions, observations and experience of HRM professionals from institutions in the countries involved. No independent research has been undertaken to verify the accuracy of the information submitted. The research shows that the governments responses to the economic crisis have varied, which may be explained by the following factors: different starting points: the existing public administration system, culture and principles, as well as the general state of affairs in the civil service HRM at the time the crisis manifested itself; degree of impact of the crisis, measured in actual level of state income reduction and fall of GDP; existing legal framework and institutional arrangements governing labour relations in the public sector, including prospects for redeployment and lay offs; political backdrop: stability versus changes in the government and/or political leadership impact of external actors like the European Union (EU), International Monetary Fund (IMF), World Bank (WB); culture and traditions of each country and its inhabitants.

However, several similarities were also identified: the level of politicization of the civil service has not changed significantly and it is perceived as being at medium in most of the countries studied; no major changes have been identified in centralization versus decentralization of decision-making and policy planning in the field of HRM;

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

the social partners, defined as representatives of public sector employees and trade unions, have in many cases been more active during the crisis, but their impact is perceived as low; ex ante policy analysis and research have not been an integral feature of HRM policy planning during the crisis; the culture and practice of communication is underdeveloped, both internally in the public sector, between management and staff, and externally, towards the public; no significant signs of innovation in HRM have been identified. One of the main outputs of this research is the collection of experiences and examples of good practices in 10 different countries in the region of Central and Eastern Europe. involvement of relevant stakeholders in HRM policy planning and implementation in Azerbaijan; the choice to cut costs in areas which do not adversely affect the functioning of the public sector in Bosnia and Herzegovina; centralization and streamlining of HRM support services in Estonia; establishment of a civil servants e-job bank, enabling job seekers access to all vacancies within the public sector through a single portal, as well as the development of an advanced training strategy for public sector managers in Hungary; expansion of advanced remuneration systems, including job classification schemes, value grading and performance linked pay, and adjustment of salary levels between the public and the private sector in Latvia; use of international assistance to develop HRM practices in Lithuania and Moldova; anti-crisis measures taken by the Government in the former Yugoslav Republic of Macedonia to prevent the dismissal of a large number of public employees, as well as the establishment of a Human Resources Management Network among civil service HRM units to promote and develop HRM functions and standards, and the sharing of best practices; package of social measures aimed at softening the impact of the crisis, provided by the Government of Serbia; extensive leadership training and the decision to prioritize training over other expenditures in the face of economic downturn in Ukraine.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

III INTRODUCTION
The multi-country activity Government Action in Response to Economic Downturn was initiated by the State Chancellery of Latvia and implemented in close cooperation with the Ministry of Finance of Estonia and the Main Department of the Civil Service of Ukraine over a period of 12 months, from June 2009 to June 2010. The central event of the activity was the 5 th International Public Management Summer Institute entitled Restructuring Government to Overcome Crisis, which took place from 17 to 21 August 2009 in Sigulda, Latvia. As a follow-up to the Summer Institute, two workshops were organized: one on impact and challenges of the economic crisis on human resources management in February 2010, in Tallinn, Estonia, followed by a workshop on functional reviews in Kiev, Ukraine two weeks later. The two workshops involved a total of 55 practitioners and academics from 15 countries, as well as 4 keynote speakers, primarily from Western Europe. Both workshops were linked to a comparative research, each covering 10 country experiences. The research methodology was developed by external consultants, whereas the collection of data and preparation of country reports were done by the workshop participants. After the data had been analyzed and presented in draft reports, the participants validated the findings and further ensured ownership of the final outcome of the studies. III.1 Purpose

The main purpose of the research has been to consolidate experiences and lessons learned, focusing on current challenges posed by the crisis and their possible impact on HRM; to identify the main trends and approaches to public sector HRM; and, finally, to produce recommendations for the future. The research puts emphasis on changes in HRM practices which may have been prompted by, and directly or indirectly affected by the crisis, with an emphasis on recent initiatives or activities launched by the governments in the countries covered by the report. In other words, the research aimed at looking specifically at HRM policies in the overall government responses to the crisis. III.2 Scope

The research encompasses the experience of the following countries: Azerbaijan, Bosnia and Herzegovina, Estonia, Hungary, Latvia, Lithuania, Moldova, Serbia, the former Yugoslav Republic of Macedonia and Ukraine. The research involves actions taken within and affecting the central government ministries, and institutions directly subordinate to these ministries. As mentioned above, the research puts emphasis on changes in HRM practices which may have been prompted by, and directly or indirectly affected by the crisis. The period covered is January 2008 to March 2010.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

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III.3

Research tools

The research relied primarily on the administration of a questionnaire (see Annex), and secondarily on discussions with participants during the Tallinn workshop. The questionnaire allowed for comments and qualitative answers. In cases where the responses were unclear, additional clarifications were sought via email. The research is based mainly on the opinions, observations and experience of HRM professionals from institutions in the countries involved. No independent research has been undertaken to verify the accuracy of the information submitted. III.4 Core topics

The following core topics were covered in the research: 1. Public sector cost cutting and downsizing measures undertaken by governments as a result of the economic downturn; the sequencing and timing of actions, and the approach to cost cutting and downsizing adopted by various governments and institutions in the region; Civil service transformation, in particular in relation to: institutional or legal status of civil servants; remuneration systems, including base pay, flexible pay, other subsidies and benefits etc; additional (social) benefits, including specific monetary allocations, leave, etc; degree of politicization, i.e. the extent to which senior officials and/or management are subject to political influence. Typical HRM measures, such as: HR planning: planning ahead the number of personnel required to carry out public administration functions; defining the competencies and skills necessary for public service provision; recruitment and selection: attraction, selection and retaining the personnel necessary to carry out public administration functions; promotion, transfer, demotion and dismissal: the career progression of civil servants/public service employees: procedures for promotion, horizontal transfer to another position, job rotation, transfer to a lower position/demotion, and dismissal; performance management: the approach to planning, managing, and assessing the performance of civil servants/public service employees and their units/departments. Performance is defined as what has been achieved (goals, tasks) and the manner how it has been achieved (skills, attitudes, behaviours); training and development: mechanisms or schemes for developing the professional skills and competencies of civil servants/public service employees; leadership development: mechanisms or schemes for developing the management skills and capacities of senior officials.

2.

3.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

4.

HRM policy development and implementation practice: responsible institutions; scope and content of tasks assigned to experts and policy planners; involvement of social partners, defined as representatives of public sector employees (trade unions); centralisation/decentralisation tendencies; international donor involvement/support programmes; ex ante and similar policy analysis initiatives undertaken to assess the impact of different alternatives/initiatives considered in response to the economic crisis. Communication undertaken by governments in order to inform and involve civil servants/public sector employees, and the general public in the decision-making process and the implementations of new policies. Impact of the crisis on the future of public sector development, in particular: impact of initiatives provoked by the crisis on the motivation of civil servants and public sector employees; appearance, and evidence of innovative solutions in the public sector HRM practices; degree of beneficial or harmful impact - gains and losses of measures implemented in the field of HRM in the medium and longer-term.

5.

6.

The degree to which the above topics are covered in each country vary, partly because some countries have taken more measures than others, and partly because of differences in the amount and level of detail of information provided by the respondents participating in the study.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

IV FINDINGS
IV.1 Public sector cost cutting and downsizing measures The responses from the institutions participating in the study revealed that not all the countries covered have experienced actual cost cutting and personnel downsizing in the public sector as a result of the economic downturn. In Azerbaijan, the expenditure levels in all state organizations were reduced. In addition, the salary freeze planned for 2010 came into effect a year earlier, in 2009. However, there was no reduction in basic salaries and supplementary benefits for civil servants, as this is prohibited by the Law on State Budget. The pension system for civil servants also remained unchanged. In Bosnia and Herzegovina, measures taken by the Government affected mostly salaries and other benefits, with changes coming into effect at the end of 2008. In line with stipulations in the IMF lending agreement, signed in 2009, public sector salaries were cut by 10%. In addition, meal supplements were reduced, and transportation subsidies for public servants living within a 3km radius from their work place were abolished. In Estonia, the personnel budget of the central government administration was cut by 8,6% in 2009 and another 7% in 2010. The number of personnel was reduced by 3 % in 2008, by another 3% in 2009, and a further reduction of 5% is planned for 2010. For the 2010 state budget, the government has decided to reduce personnel costs by 9%. Public sector agencies have stopped paying performance based salary top-ups and other bonuses, and allowances have been reduced or abolished. In 2009 and 2010, other reductions were also being implemented, for example in trainings budgets, business travels, study leave, etc. Finally, in recent years, efforts have been made to streamline state structures aiming to making them more efficient, among other by merging state agencies. There has been a considerable increase in such activities in the period 2008 2010. Although Hungary was heavily hit by the economic crisis, the impact on the public sector was less significant. As a part of the 2009 Bajnai-package1, salaries of civil servants were cut by 8% (corresponding to the abolishment of the so-called 13th-month wage). A hiring freeze was also introduced. In Latvia, the 2009 Law On Remuneration of Officials and Employees of State and Local Government Authorities in 2009 decreased the amount set aside in central and local budgets for remuneration of employees by 15%. The Law also envisaged the following cost cutting measures: bonuses, gratuities and annual leave allowances not disbursed in 2009; management contracts abolished; childcare allowance reduced; allowance in the case of the death of a family member or dependant reduced; salary supplements for taking on additional duties during the absence of a colleague limited to 20% of monthly salary; limitations on dismissal allowances. In July 2009, another reduction of 20% of monthly salaries was implemented, followed by a further reduction of
1

The Government of Hungary introduced the Bajnai-package, named after the new Prime Minister Gordon Bajnai.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

5% in January 2010. The average public sector salary was reduced by 28% in the period 2008 2010, from 832 EUR in 2008 to 689 EUR in 2009 and 600 EUR in January 2010. Simultaneously, the number of employees in state institutions was reduced by 11% between 2009 and 2010. In Lithuania, the Seimas (Parliament) adopted decisions to reduce the remuneration of civil servants three times, in December 2008, April 2009 and July 2009, resulting in an average salary cut of 11% (from 974 Euro/month in 2008 to 867 euro/month in 2009). Moreover, the basic pay was reduced by 8%, from 490 Lt/month (690 euro/month) to 450 Lt/month (630 euro/month) in the period December 2008 July 2009, and bonuses were reduced. The upper ceiling on staffing in central government organisations and agencies was reduced by 5,6% in 2009, but it did not result in any real staff reduction. A hiring freeze was announced, and the possibility of taking unpaid leave for up to 10 days was abolished. The process to retool the machinery of government was initiated in 2008, including abolishment of administrative levels (in the police force) and restructuring of ministries (new Ministry of Energy; staff mergers). A variety of other reforms are underway in each sector of government. In Moldova, the Government reduced the number of public sector employees by 3.200 in 2008 and 4.000 in 2009. In December 2009, an Economic Stabilization and Recovery Program was approved, foreseeing further cost cutting and downsizing measures. The 2010 Budget Law stipulates the reduction of personnel expenditures by 5%. Nevertheless, the actual number of employees in central government institutions has not been reduced; on the contrary, the total number of employees increased by 1,7% in 2008 and by another 1% in 2009. In January 2010, the Government of Moldova signed a Memorandum with the IMF for the period of 2010-2012. The Memorandum stipulates a series of cost cutting and downsizing measures in the public sector. In Serbia, the Government adopted a Plan for Economic Stabilization in June 2009, which prescribed public sector saving by 89 billion RSD (or about 840 million Euros). The personnel budget of the General Secretariat of the Government will be cut by 23% in 2010. Salaries between 400 and 940 Euro/month will be cut by 10%, whereas salaries of 950 euro/month and higher will be cut by 15%. The savings achieved by these measures will be paid into a special fund set up to soften the impact of crisis. A further reduction in the number of public sector employees, by 10 % (8.000 employees) is planned by the end of 2010. In the former Yugoslav Republic of Macedonia, the anti-crisis measures undertaken by the Government were primarily of the ex ante character, to prevent large-scale dismissal of employees. A planned 10% rise in public sector salaries was postponed, and bonuses were abolished. A temporary hiring freeze was initiated, along with re-assignment of civil servants to new functions, and reductions in travel budgets. The operational costs were cut by 16% among other, by a procurement freeze (on furniture, equipment and vehicles); stricter control on official travel and use of mobile phones; reduction in expenditures for advertisements, entertainment and sponsorships; rigorous control with remuneration and other expenses for members of steering and supervision committees, and a ban on paying allowances to members of commissions established within the public sector institutions. The total budget for public sector remuneration was reduced by 6,13 % in 2010 compared to 2009.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

In Ukraine, the first cost cutting measures were initiated in autumn 2008, after the crisis had manifested itself. Controls on budgetary expenses and outlays were strengthened, and a hiring freeze was introduced in December 2008. The average monthly remuneration in the Department of the Ukrainian Civil Service was cut by 13% in 2009, and another 5% in 2010. There are also plans to reduce the overall number of public servants by 20% in 2010. IV.2 Transformation of the civil service In some countries, the economic downturn not only forced the implementation of cost cutting measures, but also prompted a review of the civil service: its legal provisions, the status of civil servants, social benefits, remuneration and the level of politicization. In Azerbaijan, the institutional status of civil servants is clearly defined. The Budget Law prohibits reduction of salaries and of certain social benefits, including coverage of expenses related to medicine and food. The level of politicization is characterised as fairly high in Azerbaijan, in particular for higher level positions (Heads of apparatus and departments). In Bosnia and Herzegovina, no changes in the institutional status of civil servants were made, but the salary system changed, with salary cuts and abolishment of certain benefits. The Parliament obliged the Council of Ministers to prepare a set of regulations, including approximately 50 new decisions, nearly 60% of which were related to HRM. The new regulations envisage savings in areas which do not adversely affect the functioning of the public sector, such as representation and travel expenditures. The level of politicization has not changed during the economic downturn and it is characterised as not significant. In Estonia, a new draft Civil Service Law has been finalised, but as it has been under elaboration for several years, it cannot be said to have been prompted by the crisis. Nevertheless, the changes introduced by the new law may contribute to mitigating the possible negative impacts of the crisis. Only public sector employees who execute functions of public authority will retain their civil servants status. By reducing the number of civil servants and balancing the rights and obligations of employees, the Law aims to make the civil service system more efficient. The salary system will be reformed by using the process of job evaluation to create new salary grades in all public organisations, with the following characteristics: salary additions for language skills and academic degrees will be abolished; more flexibility, as individual bonuses can represent as much as 30% of the total salary; more transparency, in the sense that information on the individual agencies salary systems, as well as the actual salaries of civil servants, will be made public. Under the new Law, the civil service will be governed by common Labour Law. With the exception of longer annual leave, all other special benefits will be abolished. Administrative

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

support services will be centralised, to ensure more transparency and availability of reliable information for state budget planning purposes2. The level of politicization in Estonian civil service has not changed significantly in the wake of the crisis, and it is characterised as medium. In Hungary, the crisis did not prompt any changes in the civil service legal framework, remuneration, or social benefits. In Latvia, the crisis and subsequent cost cuts revealed several shortcomings in the existing legal framework, leaving civil servants with less protection against unfair treatment compared to employees under regular labour contracts. Consequently, three main alternatives for civil service reform were formulated, and are currently being discussed among experts and politicians: the definition of who is a civil servant will be revised and the concept of civil service is introduced in the whole public sector, including the local level; the definition of who is a civil servant will be revised and two groups of employees will be created (a) senior civil service, comprising heads of institutions, and (b) all other public service employees; as long as actual job functions are similar on the central and local levels, the concept of civil service will also be introduced at the local level. The Latvian Civil Service Law states that political neutrality is one of the main characteristics of the civil service. Ministers are involved in the appointment, promotion, remuneration, dismissal of State Secretaries and Heads of subordinate bodies. The level of politicization has not changed significantly in the wake of the crisis and is characterised as medium. Lithuania has not changed the provisions of the civil service legal framework in the period of 2008-2010. A new concept for civil service reform is under discussion among different social partners, including trade unions, universities, and political parties. The level of politicization, perceived as medium, has not significantly changed during the period under examination. The law prohibits political influence on the actions of senior civil servants; however, politicians may have exerted influence on the appointment of senior officials in specific situations. In Moldova, the new Civil Service Law came into force on 1 January 2009, as part of an ongoing reform process not prompted by the crisis. The Law clearly distinguishes between civil service and non-civil service jobs, and it may result in a reduction of expenditures. In 2010, the following changes will be implemented in the civil service remuneration system: improvement of the severance pay provision mechanism in case of disbandment of a public authority, downsizing or changes in payroll; salary increases planned for 1 October 2009 for civil servants were postponed

See http://www.fin.ee/index.php?id=101002 for information about the centralization project at the state level in Estonia.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

for 2010; and for military and staff of national defence, state security and public order bodies for 2011 and 2012 respectively; provision of material aid reduced from two to one per year; reduction in the size of incentive payments. A new remuneration system will be implemented in 2012. The level of politicization is characterised as medium in Moldova. Ministers, Vice-Ministers, Directors of agencies are all politically appointed, by the President and the Government. At the level of Heads of divisions and units, the level of politicization is low. On average, more than 80% of Heads of divisions and units remain in their position when the government changes. In Serbia, the Civil Service Act was amended in December 2009 and a new Law on determining the maximum number of employees in Administration was passed. The amendments to the Civil Service Act provide for gradual decentralisation of HRM procedures by granting individual Ministries the right to advertise vacancies in order to speed up the recruitment process. Internal competition procedures are also no longer mandatory, which makes the civil service more accessible to outsiders, but this may also increase politicisation. The consequences of negative performance appraisal are more severe and provide managers with the opportunity to terminate employment of civil servants who do not perform well only after 4 months (in comparison to 15 months earlier on)3. To counteract social hardship following dismissals, the Government has adopted a package of measures such as extended paid leaves, provision of dismissal wages and health insurance to civil servants who have been laid off, and special aid to the most vulnerable categories. The level of politicization is perceived as low, with no changes prompted by the crisis. In the former Yugoslav Republic of Macedonia, changes in the Civil Servants Law were adopted in September 2009, and came into force in March 2010. Additionally, for the first time, a Law on Public Service is in the process of being adopted by the National Assembly. The legal status of civil servants, remuneration system, and social benefits remain unchanged. The level of politicization is perceived as low and no changes have occurred during the economic downturn. In Ukraine, no changes were made in the legal status of civil servants, remuneration system, and social benefits, but due to a devaluation of the national currency, the purchasing power of civil servants was reduced. The crisis sparked more activity from the side of the trade unions, and their role in securing benefits for civil servants is perceived as significant. The level of politicization of the civil service is perceived as rather high, and it has not changed during the economic downturn.

The publishers are indebted to Aleksandra Rabrenovic of the Institute of Comparative Law in Serbia for providing information about the amendments to the Civil Service Act.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

IV.3 Human resources management measures Besides cost cutting and downsizing measures, many countries are developing their approach to HRM, among other by re-designing the existing system and introducing strategic HRM policies. However, it should be noted that the most important changes in this field have been planned long before the crisis emerged and would in all likelihood have been implemented irrespectively of the crisis. In Azerbaijan, significant developments in HRM practices have occurred, and a new Civil Service HRM Strategy will be adopted in 2010. In the area of recruitment and selection, procedures for recruitment were improved, and new rules, related among other to required test scores for positions in the local administration (which were lowered to attract more personnel to the regions) and IQ tests, were adopted. The new measures relate to the design and conduct of job interviews, involving, among other, independent experts, to increase objectivity, attract competent candidates and building public trust. As of 2008, promotion in civil service is supposed to be carried out based on results of interviews. A mechanism for internal job rotation within state bodies has been partially established, and improvements to the mechanism, as well as improvements in the procedures for performance appraisal and appeal in case of dismissal, will be made in 2010. As a result of the crisis, only key promotions are allowed, limiting the prospects for career advancement. Combined with a noncompetitive public sector salary level, it has resulted in a brain drain to the private sector. In the area of performance planning and evaluation (performance management), a new Law was enacted in 2008, envisaging yearly performance appraisals conducted by direct supervisors, and in 2009, rules for how to carry out the appraisals were issued. These rules will come into force in 2010, and the appraisal process will be linked to other aspects of HRM such as job rotation, promotion, additional education, motivation incentives, etc. In the area of training and capacity development, new legislation, dating from 2008 and 2009, define types, forms, terms, financial sources and other related issues related to training and education of civil servants. In 2010, a state order on the re-training and professional development of civil servants is planned, providing for the creation of a civil servant training centre; examination rules; rules governing the selection of civil servants for trainings abroad, etc. In addition, the strengthening of financial support for training and education is planned. However, as a result of the crisis, current training initiatives focus only on key personnel and some activities have been cancelled. In the area of leadership development, special trainings on management and leadership for senior officials have been conducted. Individual career planning for reserve cadres for senior positions has been established. Finally, in the area of remuneration, the system of civil servants remuneration was determined by a unique standard legal act in 2008, defining a remuneration framework for each function/position. The remuneration consists of official salary, additional payments (for length of service, professional rank), and bonuses. In 2010, the establishment of a performance- and skillsbased, pay system, and a corresponding review of the bonus system is planned. However, as a result of the crisis, the planned salary review for the civil servants has been postponed.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

In Bosnia and Herzegovina, various projects have been implemented to make the personnel selection process more efficient. Since 2009, public sector institutions have to submit annual recruitment plans to the Civil Service Agency. As a result of the crisis, in the period 2009 2010, there have been more internal and external transfers than new recruitments. In the area of training and capacity development, new training topics and a new space for training were made available in 2009, but the number of trainings was limited in 2010 due to budgetary cuts. In the area of remuneration, salaries and salary supplements were increased in 2008 and lowered in 2009. In 2010, there was a salary freeze and approximately 50 new decisions, 60% of which relate to HRM issues such as travel and representation, were issued by the Council of Ministers. In Estonia, the government has not taken any specific steps in the field of HRM as a result of the crisis. As mentioned earlier in the report, the changes planned in the context of the new Civil Service Law were not prompted by the crisis. Estonia has a decentralised approach to HRM. Every Ministry decides how to manage its personnel resources. Accordingly, as ministries had their budgets cut as a result of the crisis, the funds available for training and capacity development were reduced. As far as the remuneration is concerned, there has been an overall decrease in (the size of) salary supplements such as performance-based bonuses and other allowances. In Hungary, no specific changes have been made in HRM as a result of the crisis. The period 2002 2010 has been characterised by comprehensive and in-depth strategic HRM reforms, and the crisis has not significantly slowed the pace of reforms. In the area of HR planning, in accordance with the stipulations of the EU Convergence Program, the Government centralized the governmental HR services into one, common, integrated HR registry system. In the future, the Government Centre aims at integrating other governmental organs in the central system, but as a result of the crisis, the process has slowed down. In the area of recruitment and selection, the Government has put emphasis on competencybased selection of public sector managers at the central and local (regional) levels, making it mandatory to institute an open selection process for all managerial posts (7000 in total). Following an increase in the number of applicants, four local centres were opened in July 2009. From January 2011, the Government Centre will offer services related to recruitment and selection to other actors in the private market. In order to develop, monitor and support the network of HR units, the central administration introduced a civil service job bank, where job seekers can access all public sector vacancies through a single website, introduced in 2008 4. A new performance evaluation system was introduced in 2007, and it is based on self-selection of core competencies (professional knowledge, communication, team-working, strategic thinking, managerial methods, responsibility, creativity and separateness), self-evaluation and discussion with supervisor. In 2007, 4,500 civil servants were included in the new system, and by the end of 2008, it comprised of 13,300 civil servants. In January 2011, it will be extended to staff at the

See the website www.kozigallas.gov.hu

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

local levels of the central administration, and the total number of civil servants included in the appraisal mechanism will be 40,000. The Government Centre offers a short course Performance evaluation training for civil servants to help employees and supervisors understand the performance evaluation process, and the curricula can be downloaded from the institutions website in electronic format (27,000 downloads so far)5. The result of the performance evaluation determines the annual salary premium of the individual civil servant. However, due to the financial crisis, the funds set aside for such premiums (previously 8% of ministerial budgets) were reduced. In the area of training and development, several training programmes have been designed and some are already being implemented.
Bib Istvn European Civil Service Fellowship Program, targets second-year university students, by providing training during weekends and breaks to prepare them for future employment in the civil service. The program is scheduled to start in September 2010. Young Civil Servant Fellowship Program (YCSP), initiated in 2007, providing opportunities for recent university graduates to spend one year working in the public sector. From a pool of 800 applicants, 185 were employed in 10 ministries in 2007/2008, and more than 70% continued working after the first year. In 2010, 144 graduates were employed under YCSP, which operates its own website for the target group6. After the first two years of operation, financing for the programme started coming from the ministries instead of from the central government. Roma Fellowship Program, financed by the EU, to assist 200 Roma graduates to enter public service. Eventually, 130 individuals passed the required examination in December 2009, and were eligible for employment in ministries. However, the future of the initiative is uncertain as the EU funding only covers the first year.

In the area of leadership development, a 600-hour Executive Master of Administration in Public Administration (EMPA) has been developed based on European standards. The successful completion of the EMPA will be a requirement for all public sector directors from 2012 onwards. Management training programmes, such as a 360-degrees evaluation training and competency workshop on performance evaluation, have been introduced to promote a professional, supporting environment for future reform implementation. In Latvia, the crisis halted the implementation of a number of initiatives in the field of HRM, initiated before the crisis. In 2005 - 2006, a new competency framework was developed for public sector employees, in the framework of a comprehensive competency-based HRM project, financed by EU structural funds. Despite the fact that the project was initially approved by the Government, it was cancelled to cut costs. In the area of HR planning, a functional tool to analyze and evaluate public administration functions, corresponding costs and required numbers of employees will be developed in 2010.

5
6

See the website www.kszk.gov.hu See the website www.osztondijasok.hu

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

In the area of recruitment and selection, a unified selection procedure and criteria will be defined for senior civil servants. With regards to career advancement provisions, a mobility framework within public administration (including local governments) will be developed in 2010. In the area of performance planning and assessment (performance management), a new electronic tool for public servant performance appraisal, based on the competency approach, will be introduced. The introduction of additional competency assessment methods like 360 evaluation and external (outsourced) competency assessment of senior public servants is currently being discussed. In the area of training and capacity building, the crisis has brought about new approaches, such as voluntary training by colleagues from other ministries and workshops to discuss problems and share experiences. Concerning leadership development, more emphasis will be put on leadership development: review of top managers competencies and provision of targeted training programmes. The remuneration system was substantially changed, mostly as a result of the crisis. In July 2010, a new remuneration system came into force at the central and local level (the latter was previously exempt), as well as in institutions such as courts, prosecutors office and statefinanced universities. Thus, the basic principles of the remuneration system introduced in 2006 job classification and grading according to perceived value, compatibility of pay levels between the public and private sector and the link between results of performance evaluation and individual pay - will be expanded to the rest of the public sector. In Lithuania, on 30 November 2009, the Prime Minister issued a decree to prepare a concept paper on the Lithuanian civil service development. The concept contains several reform measures, but it is too early to judge their actual content and potential impact. A project entitled Analysis of required civil service competencies and job descriptions for the civil servants directory was initiated in 2009. In Moldova, many HRM reforms were accomplished during the period of 2008-2010, mostly as an integral part of the ongoing efforts to reform the public sector. In the area of HR planning, an estimate of the number of personnel required to carry out specific functions in a number of public bodies was established. In 2010, the estimate was reduced downwards, as a part of an overall effort to reduce the size of the public sector. In the area of recruitment and selection, until 2008, most civil servants were hired internally, on the basis of an appointment by the head of the body, without open competition or testing. In 2009, both internal and external recruitment may be used when filling a vacancy; internal recruitment through promotion based on merit, or transfer, and external recruitment through open competition, involving review of application and screening of candidates; testing and interviewing. As of 2009, promotion and dismissal are linked to performance. The performance management system has been significantly modernised. Until 2008, all civil servants received an attestation every three years, irrespective of performance and results. In 2009, a new performance appraisal was conducted for the first time, assessing civil servants on achieved results, skills and attitudes. More than a thousand middle managers (evaluators) from

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

central and local authorities were trained in a total of 34 workshops. As of 2010, according to the Law on Civil Service, performance appraisals will be conducted annually. A guide on performance appraisals will be developed and over 1.000 middle managers will be trained. In the area of training and capacity development, in 2008 and 2009, a maximum of 2% of the salary fund could be allocated for staff training and capacity development activities. As of 2010, a minimum of 2% of the salary fund should be allocated for such activities, but some public bodies cannot afford it because of budget limitations. Training activities included in the government training plan are still financed by the state budget, and additional training activities are financed from various grants, such as the Multi-Donor Trust Fund for the Central Public Administration Reform. Finally, a specific set of trainings in the area of public finance management will be organised by the Ministry of Finance. In the area of leadership development, workshops on organisational management, intended to develop the managerial skills of senior officials were organised in 2008 and 2009. As for the remuneration system, in 2009, the Law on Pay System was applied with some modifications such as postponement of planned salary increases. In 2010, a new remuneration system for civil servants is being developed and will be implemented in 2012. In the former Yugoslav Republic of Macedonia, there have been no significant changes in HR planning. With the exception of 5.000 unemployed individuals who will be engaged by the Government in public works for a period of 6 months, a temporary hiring freeze came into force in 2009 and stricter control with temporary employment will be enforced. In the area of performance planning and assessment (performance management), new guidelines were adopted in 2008, stating that seniority allowances may be paid only if the civil servant has been assessed as outstanding instead of satisfactory, as provided for in the Law on Civil Servants. In 2009, the disbursement of salary bonuses to civil servant who were evaluated as outstanding was postponed. In 2010, provisions allowing for promotion and salary increase after three consecutive evaluations outstanding and satisfactory were put into force. The budget for the generic annual training programme diminished in 2010. In Ukraine, changes in the countrys political sphere have influenced the HRM processes, in particular, the practices of recruitment, selection, and career advancement. In the area of HR planning, a methodology will be developed in 2010 to determine the number of necessary human resources for implementation of state programmes. Most training activities in 2008 - 2009 were focused on leadership training. In 2009, the trainings covered the impact of the crisis and budget reductions, whereas in 2010, emphasis was put on exchange of experience in the area of budgetary restraint. The remuneration system in Ukraine was not fundamentally affected, although certain cuts have been made and further salary decreases are expected in 2010.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

IV.4 Changes in HRM policy planning and implementation practice A number of changes in the institutions responsible for HRM policy have been observed in the period 2008-2010. In some countries, the crisis has triggered the activity of social partners, although their impact on policy planning is perceived as minor. Findings suggest that the crisis has had no obvious impact on centralisation/decentralisation tendencies, whereas it may have reinforced the tendency of not carrying out proper policy analyses when designing new HRM policies. In several countries, the development and implementation of HRM policies are supported by international donors. In Azerbaijan, HRM planning is the responsibility of the Civil Service Commission under the President of the Republic of Azerbaijan. In the period 2008-2009, its functions were widened considerably and its capacity was reinforced. Within the scope and content of tasks of the Commission are: defining training needs for civil servants (2008); training strategy for civil servants (2009); professional development system of civil servants; state order on re-training and professional development of civil servants (2010); rules for performance appraisal of civil servants (2009). The role of Unions in HRM policy planning and implementation has significantly increased. The Unions play a significant role in the process of dismissal and granting of social benefits to civil servants. Furthermore, NGOs participate in the annual performance evaluation of state bodies. On the other hand, recruitment, regulation, and control over the conduct of civil servants, as well determining mechanisms for performance appraisal, have become more centralised. In Bosnia and Herzegovina, the main institutions responsible for HRM policy planning are the Council of Ministers and the Parliament. Public service institutions are responsible for drafting particular regulations, each in their jurisdiction. The involvement of social partners in the decisionmaking process is perceived as minor. The decision-making process is relatively decentralized, as it was earlier. Concerning the use of policy analysis, decision makers did not at an early stage put in place programs that would reduce the negative impacts of the crisis. On the contrary, decisions were made when the crisis had already affected the country, and no time was left to conduct a proper policy analysis. In Estonia, there has been a shift of responsible institutions in the area of HRM policy. Before 2010, the Ministry of Finance (MoF) was only responsible for remuneration whereas HRM policy planning was the responsibility of the State Chancellery. As of January 2010, the MoF is responsible for civil service development, and experts and policy planners from the relevant unit in State Chancellery were transferred to the Ministry of Finance. The development of the senior civil service - secretary generals and head of agencies - still remains the responsibility of State Chancellery. The Ministry of Justice is responsible for drafting legislation concerning the civil service, whereas the Ministry of Social Affairs is responsible for pensions. Although the Civil Service Law regulates the civil service on the local government level as well, certain conditions are decided in every local government unit level, under the supervision of the Ministry of Internal Affairs. The level of involvement of social partners in decision-making is perceived as medium in Estonia. The Federation of Trade Unions of State and Local Government Employees (ROTAL) have been

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

involved in the discussions related to the new Public Service Law. There is also a governmental committee engaged in annual negotiations with trade unions in issues of remuneration, etc. Maintaining the social dialogue is one of the tasks of the Ministry of Finance. However, the civil service is not a very active group, and the union membership rate is low. The level of centralisation of decisions is also characterised as medium. The Ministry of Finance coordinates HRM policy and develops centrally agreed personnel management principles, but it does not have centralized decision making power on how exactly institutions should implement these policies. When the Government decides to cut the operational expenditure, every Ministry has discretionary power to decide which measures to implement. The new Civil Service Law will lead to a higher level of centralisation in the planning, recruitment and selection of human resources, as well as remuneration, with the aim of providing a better planning tool for policy maker.
The responsibilities of Ministry of Finance are the following: co-ordination of HRM policy and support to developing the public service in general; preparation of all government decrees; preparation of personnel plans, attached to annual budget law (in the planning phase); development of centrally agreed personnel management principles and formulation of national training priorities; promotion of cooperation between HR and training managers; supporting the development of public service ethics and common values; collecting public service statistics; developing remuneration policies; providing guidelines and best practice information. The responsibilities of the State Chancellery are: support to training and development of top civil service officials; co-ordination of the recruitment and promotion of top officials through managing the Competition and Evaluation Committee of Higher State Public Servants headed by the State Secretary.

In Hungary, there have been no changes in the division of responsibilities for HRM policy planning and implementation, or in the centralisation versus decentralisation of decision-making. It is obligatory by law to involve the social partners. In Latvia, the Policy Coordination Department of the State Chancellery is responsible for HRM policy planning and policy coordination. The Ministry of Finance is responsible for developing the remuneration policy. Other public administration institutions are responsible for the implementation and coordination of HRM policies within their organisation. The civil service administration, responsible for maintaining a civil service registry and investigating disciplinary issues, was abolished in January 2009. The level of involvement of social partners in Latvia is regarded as medium. During the crisis, the level of interaction between the social partners has been higher, but not necessarily productive. A variety of mechanisms for consulting social partners on economic issues exist, such as the National Tripartite Council, and the Reform Steering Group.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

The centralisation versus decentralisation issue is controversial in Latvia. On the one hand, the decision making process has become more centralized, to allow for the implementation of appropriate measures in reducing public spending. On the other hand, the responsibility and discretionary powers of senior managers for policy implementation, including resources allocation and employee appraisal, has increased. There are several projects designed to support HRM development in Latvia, financed, among others, by EU structural funds (project postponed) and the European Institute of Public Administration (EIPA). Concerning policy analysis, the short time frame for legislative drafting and decision-making during the crisis period has limited the possibilities to provide qualitative and indepth analysis. The sheer number of decisions required, combined with the conditions set by international creditors, complicates the process. Nevertheless, policy planners keep working on providing ex-ante analysis and involving stakeholders as it is an integral part of Latvias public administration policymaking process. In Lithuania, there have been no changes in the division of responsibilities related to HRM policy planning and implementation during the period of 2008-2010. The level of centralisation of decisions has also remained unchanged. The level of involvement of social partners, perceived as medium, is promoted in the framework of the National Agreement, between trade unions and business. A new concept for civil service reform is under discussion with various social partners, including trade unions, universities, and political parties. Several projects supported by EU structural funds assistance have been launched to support the HRM policy planning and implementation initiatives.
Projects launched to support HRM policy planning and implementation in Lithuania: Analysis of necessary civil service competencies and job descriptions for civil servants directory; Improvement of the civil servants selection system; Modernization of the Register of civil servants; Research on improving civil servants main motivation factors (remuneration, evaluation of their performance, social security, pensions).

In Moldova, a Public Administration Reform Unit (PAR Unit) under the Prime Minister functioned in the period 2006 2008. Since April 2008, a Personnel Policy Division, sponsored by a MultiDonor Trust Fund for the Central Public Administration Reform, was created within the State Chancellery. The new division, staffed by five employees and four local consultants, is responsible for HRM policy planning and monitoring, or more specifically, monitoring of implementation of HRM procedures providing methodological and assistance/support in the field of HRM; and professional and personal development of HRM practitioners linking HRM policy with overall strategic planning and management analysis and reporting on HRM. The Ministry of Finance is also involved in setting upper staff ceilings and limiting personnel costs. The Ministry of Labour, Social Protection and Family is in charge of the remuneration policy and initiates measures to optimize use of personnel.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

The involvement of social partners in HRM policy-making is characterised as below medium. The National Commission for consultations and collective negotiations involves representatives of the Government, Employers Associations, and Trade Unions. The purpose of the Commission is to participate in consultations and solve labour- and socio-economic related problems. In addition, the 2010 Ruling for Public Authorities envisages that drafting of normative acts on remuneration, health protection, price formation, which must be discussed with trade unions. Since the beginning of 2010, ex-ante policy analysis is being piloted in five ministries, and the 2009-2010 Economic Stabilization and Recovery Program has been discussed with relevant stakeholders. Several projects to support HRM policy planning and implementation have been initiated within the framework of the EU structural funds, including the Multi-Donor Trust Fund under the World Bank to assist the Government in the implementation of the Central Public Administration Reform (CPAR); the Institutional Capacity Building of Public Authorities, funded by the European Commission (currently in the planning phase), and several other projects focusing on capacity building of civil servants, supported by UNDP, SIDA, USAID, and the European Commission. In Serbia, the Government is responsible for HRM policy planning, whereas the Human Resources Management Service, whose Director is responsible to the Secretary-General of the Government, is responsible for policy implementation. The HRM service was established in 2005 and its tasks include: announcing competitions for vacancy positions; providing HRM advice; ensuring professional development of civil servants; providing logistical and technical support to the High Administrative Council; and promoting professional and technical activities of significance for the Governments HRM policies. Concerning the involvement of social partners, the trade unions are generally involved in proposing initiatives and discussing the adoption of laws or by-laws in the area of HRM. However, it is difficult to evaluate their impact. In the former Yugoslav Republic of Macedonia, the Government is responsible for HRM policy planning, and the individual institutions are responsible for implementation. The Civil Servants Agency (CSA) is responsible for developing HRM policies, and the main tasks of the Agency are the development of a merit-based system for recruitment and selection; horizontal coordination of development and management of HR; introduction and implementation of HRM standards; standardizing job descriptions; and presiding over, as well as coordinating the HRM network. The involvement of social partners in the HRM policy making is perceived as below medium. Social partners are consulted, but their contribution tends to be minimal. A debate developed on anticrisis measures, and some suggestions put forward by the social partners were accepted, but the majority of the solutions adopted stemmed from the Government. In Ukraine, the Main Department of the Civil Service is responsible for HRM policy planning and implementation. The School of Senior Civil Service, established in October 2008, is responsible for training. The institutional setup did not change in light of the crisis, and the involvement of social partners in the HRM policy making is characterised as medium, with few or no social partners who assert actual influence on the public sector decision-making process. There are

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

some signs of a more decentralised HRM policy implementation practice, as some functions have been delegated to territorial units. IV.5 Communication policies The issue of communication seems to be critical when it comes to cost cutting and downsizing of the public service, since the impact on the personal well-being of public servants is significant. Nevertheless, the information gathered reveals that there have been few efforts at developing consistent communication policies in the majority of the countries studied. In Bosnia and Herzegovina, decisions are made at the highest level without consulting the affected civil servants or the general public. In Estonia, there has been regular communication between, and within the institutions, mostly on a top-down approach, with some observed differences in approaches between different institutions. Towards the general public, there has been a steady stream of information, in the form of press releases, press conferences of the Government, and comments of civil servants on television and radio, in particular related to the state budget. During this period, there has been increased media interest, among other about costs and measures of cost cutting. In Hungary, as far as the cost cutting and downsizing of the public sector was limited, there was little communication surrounding these issues. In Latvia, the communication pattern and practice depends on the institution; there was no common communication plan. The cost cutting and downsizing measures were put forward as one of the main priorities of the government. In Lithuania, there was no special communication plan put in place. The main message was that because of the crisis and cuts in various areas of the economy, similar measures will have to be implemented in the public sector. The National Agreement was published on the Governments official web page7. In Moldova, the main form of communication was internal meetings. Official documents were published and presented to the general public through the media (TV and newspapers) and the Government website. In Serbia, after adoption of the Law on determination of the maximum number of employees in the Republics Administration, the Government published an upper limit on the number of employees in the Administration, with precise figures for each body, obliging all institutions to act in accordance with this decision. All relevant acts were published in the Official Gazette of the Republic of Serbia, and numerous press conferences were held to inform the general public. In Ukraine, as cost cutting was limited, no special measures to communicate the proposed changes were taken.

See http://www.lrv.lt/en/activities/national-agreement/

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

IV.6

Impact of the crisis on the motivation of civil servants and development of public service in the longer term

Attempting to assess the impact of recent reforms represented a challenge for the practitioners involved in this study. Nevertheless, the optional questions on possible impact of the crisis, the longer-term gains and losses, and the likelihood of the crisis leading to innovation, were answered by 2/3rds of the participants. In Azerbaijan, the development of an HR strategy, based on principles of results-based performance assessment and increased mobility, is seen as the most beneficial outcome of the crisis, whereas the potential negative impact is related to the lack of salary reviews. In Bosnia and Herzegovina, the degree of motivation among civil servants has not been significantly affected as far as the prospect for a better paid job is very limited, since the private sector was hit harder by the economic crisis. No major innovation in HRM has come about; in the medium- and long-term, the current salary reduction may have a negative impact on staffing and corruption levels, in particular if other sectors of the economy will recover and raise salaries. In Estonia, no general survey has been conducted on how the crisis has influenced the motivation of civil servants. Nevertheless, there exists a certain amount of dissatisfaction over the reduction of salaries, which in turn is translated into less willingness to make an extra effort when required. At the same time, due to the fact that the Estonian private sector was hard hit by the crisis, there is a general acceptance and understanding of the need to reduce salaries and costs in the public sector. Since Hungary did not experience any significant cost cutting or downsizing measures, it is difficult to judge the longer term impact of the crisis. Nevertheless, the introduction of new HR approaches like performance management and evaluation, and the placement of additional emphasis on the role managers, which have led to a modernization of the governmental system as a whole, are perceived as useful for the advancement of the public sector in the future. In Latvia, which was severely hit by crisis, the impact of the crisis on the motivation of civil servants is perceived as negative in the short- and long term, as it has affected salaries, social benefits, and training and career prospects. Nevertheless, taking into account the general unemployment level in Latvia, simply having a job seems to be a powerful motivation factor to remain in the public sector. Moreover, the streamlining of processes review of functions, centralisation of record management and bookkeeping, introduction of IT tools to decrease the proportion of manual work, standardization of processes within the public administration (records management in HRM) can be characterised as innovations or beneficial impacts of the crisis. In Lithuania the move towards results orientation in the civil service can be characterised as beneficial. Several strategies related to, for example, the rotation of senior civil servants, and introduction of limits of tenures for senior civil servants (maximum eight years in the same position) are under discussion. Efforts to strengthen the accountability and responsibility of senior civil servants, while giving them more freedom to manage, are also among the perceived gains.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

For Moldova, any measure related to cost cutting and downsizing are influencing negatively the motivation of civil servants and other public sector employees. In this context, the possible risks are high turnover, difficulties in recruiting qualified personnel and retaining top performers, reduced levels of productivity and performance, and low appeal of civil service employment among young professionals. For the former Yugoslav Republic of Macedonia, the development of a training strategy, the restructuring of bodies involved in the coordination of training for civil servants, as well as various new capacity building measures all represent positive improvements. Moreover, the establishment of a Human Resources Management Network among HRM units in the civil service will probably bring benefits in the medium-term. Among the negative impacts are the Governments reductions in capital investments, and the postponement of a new action plan for capital investments. In Ukraine, the motivation of civil servants was not negatively affected by the crisis as far as public service salaries remained stable, whereas salaries in the private sector fell.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

V COMPARATIVE ANALYSIS
V.1 Approach to public sector cost cutting and downsizing

The study shows that among the 10 cases analysed in this research, three types of approaches to cost cutting may be identified: minor cost cutting, not affecting staffing or salary levels, focusing on streamlining of other expenses and natural staff reduction (Hungary; Azerbaijan). In some countries, salary reductions or elimination of benefits are prohibited by Law (Azerbaijan; Ukraine); medium cost cutting measures, resulting in salary and staff reductions of no more than 10% (Estonia; the former Yugoslav Republic of Macedonia; Moldova); severe cost cutting, reducing personnel budgets, salaries and/or the number of staff by more than 10% (Bosnia and Herzegovina; Latvia; Lithuania; Serbia; Ukraine).

The approach adopted seems to be based on a number of considerations: V.2 scale and proportion of public service expenditure as part of the overall budget before the crisis, including the number of civil servants/public sector employees and the level of their remuneration; scale and severity of the economic downturn; the extent to which additional (social) benefits granted to civil servants/public service employees are protected by legislation; stability and effectiveness of the government; obligations towards international organizations like IMF; WB; EU; culture and traditions of the country. Trends of civil service transformation

There have been no significant developments pointing to a transformation of the civil service as a result of the crisis. The new Civil Service Law prepared in Estonia was drafted independently of the crisis, and recent developments in Lithuania and Moldova are mostly an integral part of the overall public service reform process initiated before the crisis in these countries. Of the countries included in this study, the crisis has served as a catalyst for change in the civil service legislation only in Latvia and the former Yugoslav Republic of Macedonia. In Latvia, the crisis revealed that in certain aspects, the rights of civil servants were less well protected by legislation compared to the rights of employees under regular labour contracts, thus, the crisis was a direct reason for reviewing the civil service legislation. Moreover, the new Law on Remuneration of State and Local Government Authorities Officials and Employees was developed as a response to the crisis. Both these initiatives are not only aimed at reducing and optimising costs, but also to improve the functioning of the civil service and the public sector remuneration system. Some initiatives, like extending the central government remuneration system to the local level in Latvia, seemed impossible to implement before the crisis, but it were

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

implemented after the crisis hit. In the FormerYugoslav Republic of Macedonia, a Law on Public Service is in the process of being adopted by the National Assembly for the first time. The level of politicization of the civil service, estimated on a scale from 1 (very low to nonexistent) to 10 (very high)8, is generally perceived as medium to low, with the exception of Azerbaijan and Ukraine (see Figure 1).

Level of politicization
1 (minimum) - 10 (maximum) Ukraine Serbia Moldova Macedonia Lithuania Latvia Estonia Bosnia and Herzegovina Azerbaijan

8 2 4 2 4 5 5 3 8

Figure 1: The level of politicization of civil service

The similar definition and the scale have been used in Expert survey for the SIGMA-OECD project on civil service developments in East Central Europe since the 2004 European Union Enlargement, November 2007.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

VI Strategic human resources management development


Strategic HRM progressed in most of the countries during the years 2008-2010. Noteworthy and comprehensive HRM reforms have been implemented or are in the planning stage in Azerbaijan, Estonia, Hungary, Lithuania, and Moldova. In Latvia, the adaptation of the new Law on Remuneration of State and Local Government Authorities Officials and Employees is characterised as one of the few positive outcomes of the crisis. The majority of the participants, in this survey, expressed hope that the current developments in performance management and development of training systems, as well as the streamlining of processes will improve the public administration in the future. On the other hand, certain important initiatives were put on hold or dropped, for example, a major reform of performance management practices and several training initiatives in Latvia; pay and promotion freeze in Azerbaijan, pay freeze in the FormerYugoslav Republic of Macedonia and a hiring freeze in most countries. All these measures have had some impact on the career prospects for civil servants, but the impact varies from country to country, and depends in part on how public sector employment compares to other types of employment within the country in terms of prospects and remuneration. VI.1 Changes in HRM policy planning and implementation No major changes have been noticed in the area of HRM policy planning and implementation. In Estonia, the responsibility for HRM policy development has shifted from the State Chancellery to the Ministry of Finance. A similar shift is being discussed in Latvia, motivated by the perception that staffing costs represent such a major expenditure that it should be managed by the institution in charge of state finances. Nevertheless, in most of the cases studied, HR development and implementation remain the responsibility of an institution close to the centre of government. The extent of the involvement of social partners in HR policy-making is perceived mostly as medium to low (see Figure 2). Although social dialogue is stipulated by law or is an inherent part of the political culture in many of the countries studied, the actual impact of the dialogue is perceived as low, among other reasons, because the low level of union membership among civil servants; the limited time available for consultations, in particular in relation to crisis-related measures9; and the conditions imposed by external actors such as the World Bank, effectively limit the space for local dialogue and participation in decision-making. Even in countries where ex-ante policy analysis and impact assessment are perceived as an integral part of the policy planning process and culture, the crisis did not allow for such time-consuming processes to run their course before decisions were made. Most decisions were made at the centre of government constituted fast responses to the crisis, as time has been a critical factor. This mode of decisionmaking may increase the risk that countries adopt ill prepared measures and in some cases counter-productive ones.

Randma Liiv, T. The Impact of the Economic Crises on the Governance in the Baltic States

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

Involvement of social partners 1 (no impact) - 5 (major impact) Ukraine Moldova Macedonia Lithuania Latvia Hungary Estonia Bosnia and Herzegovina Azerbaijan 3 2 2 3 3 2 2 1 2

Figure 2: The involvement of social partners in HRM policy planning

The centralisation/decentralisation tendencies in relation to HR policy planning and implementation have not been significantly affected (see Figure 3). This can partly be explained by the fact that the current HRM policy planning practice is highly centralised in most of the countries surveyed, and during the crisis, the existing patterns were simply reinforced10. Centralisation/decentralisation tendencies
-2 (centralised), 0 (the same), 2 (decentralised) 1 0 0 0 0 0 1

-2 Figure 3: The involvement of social partners in HRM policy planning

10

Randma Liiv, T. The Impact of the Economic Crises on the Governance in the Baltic States

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

VI.2 Communication during crisis Observations from the countries included in this study do not reveal any innovative or creative approaches to providing, sharing, and exchanging information about the crisis and the governments response. Moreover, it seems that not much attention has been paid to the necessity and importance of communication, in particular internally - within the public sector between managers and subordinates. In most cases, formal channels of communication like press conferences, official newsletters and web pages have been used to make information known, but little has been done to engage public sector managers in internal information sharing and exchanges with their staff. VI.3 Motivation, innovation and the possible impact of the crisis in the longer term The following can be characterised as possible gains of the crisis: drive towards more result orientation in the public service; streamlining of processes; and new and creative approaches to training. The losses are as follows: higher risk of corruption as a consequence of reduced remuneration; reduced motivation and limited career prospects, sometimes accompanied by an outflow of qualified staff from the public service, and difficulties in retaining top performers; less possibilities for training and professional development, (further) decreasing motivation and competency level, and eventually resulting in lower productivity and performance. The level of motivation has been less affected in the countries where salaries in the private sector are lower or jobs more unstable compared to those in the public sector. The motivation to keep ones job in a country where the level of unemployment is 20% is undoubtedly strong, but it is not a sufficient and sustainable basis upon which to build a public service for the future. Finally, it has been said that a drive for more innovation could be one of the positive side effects of the crisis, but it has not manifested itself in HRM in the public sector. In order to become drivers of innovation and change, HR professionals seem to have a gap to bridge, perhaps in terms of motivation, perspective, leadership abilities, financial or moral support, communication, or maybe something else? The answer to this is beyond the scope of this research, but it will be vital to the success of public administration reforms, and it should be explored at the first possible opportunity.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

VII

CONCLUSIONS AND LESSONS LEARNED

The research shows that the Governments responses to the economic crisis have varied. This may be explained by the following factors: different starting points: the existing public administration system, culture and principles, as well as the general state of affairs in the civil service and HRM at the time the crisis manifested itself; degree of impact of the crisis, measured in actual levels of state income reduction and fall of GDP; existing legal frameworks and institutional arrangements governing labour relations in the public sector, including prospects for redeployment and lay offs; political backdrop: stability versus changes in the government/political leadership; impact of external actors like the European Union (EU), International Monetary Fund (IMF), World Bank (WB); culture and traditions of each country and its inhabitants.

However, several similarities were also identified: the level of politicization of the civil service has not changed significantly and it is perceived as being medium in most of the countries studied; no major changes have been identified in centralization versus decentralization of decision-making and policy planning in the field of HRM; the social partners, defined as representatives of public sector employers and employees (trade unions), have in many cases been more active during the crisis, but their impact is perceived as low; ex ante policy analysis and research have not been an integral feature of HRM policy planning during the crisis; the culture and practice of communication is underdeveloped, both internally in the public sector, between management and staff, and externally, towards the public; No significant signs of innovation in HRM have been identified.

One of the main outputs of this research is the collection of experiences and examples of good practices in 10 different countries in the region of Central and Eastern Europe.

involvement of relevant stakeholders in HRM policy planning and implementation in Azerbaijan;

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

the choice to cut costs in areas which do not adversely affect the functioning of the public sector in Bosnia and Herzegovina; centralization and streamlining of HRM support services in Estonia; establishment of a civil servants e-job bank, enabling job seekers access to all vacancies within the public sector through a single portal, as well as the development of an advanced training strategy for public sector managers in Hungary; expansion of advanced remuneration systems, including job classification schemes, value grading and performance linked pay, and adjustment of salary levels between the public and the private sector in Latvia; use of international assistance to develop HRM practices in Lithuania and Moldova; anti-crisis measures taken by the Government in the former Yugoslav Republic of Macedonia to prevent the dismissal of a large number of public employees, as well as the establishment of a Human Resources Management Network among civil service HRM units to promote and develop HRM functions and standards, and the sharing of best practices; package of social measures aimed at softening the impact of the crisis, provided by the Government of Serbia; extensive leadership training and the decision to prioritize training over other expenditures in the face of economic downturn in Ukraine.

HRM is an important part of the management of any organisation. In a period of crisis, HRM practitioners can play the role of strategic partners and efficient administrators. A strategic partner is a driver for change and innovation, a pro-active policy developer, whereas an efficient administrator supports and follows up on the policy measures enacted by the Government. In the countries which participated in this study, the role of HRM practitioners has varied, but although the institutional and administrative context surely sets certain limitations, the level of willingness to engage, as well as the perspective and the expertise is more or less in the hands of HRM practitioners themselves. Hopefully, the exchange of experiences, represented by this study, will be one of the triggers for further changes in HRM practices in the region.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

VIII REFERENCES
1. Meyer-Sahling, J.H. Sustainability of Civil Service Reforms in Central and Eastern Europe five years after EU Accession, SIGMA Paper No.44, SIGMA, April 2009, pp. 90; 2. Randma-Liiv, T. The Impact of the Economic Crises on the Governance in the Baltic States, pp. 3; 3. The Senior Civil Service after Accession, Expert Survey for the SIGMA-OECD project on civil service developments in East Central Europe since the 2004 European Union Enlargement, SIGMA, November 2007, pp.28; 4. Ministry of Finance of Estonia: www.fin.ee 5. E-job bank of Hungary: www.kozigallas.gov.hu 6. Government Centre for Public Administration and Human Resources Services of Hungary: www.kszk.gov.hu 7. Government of Lithuania: www.lrv.lt 8. RCPAR: www.rcpar.org 9. Young Civil Servant Fellowship Programme of Hungary: www.osztondijasok.hu

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

IX APPENDIX: SURVEY QUESTIONNAIRE


The following questionnaire served as a basis for the country contributions. The main purpose of the particular set of questions was to make a clear picture of what actions countries have taken in the situation of crisis and what can we expect as a consequence. The intention was to provoke innovative and open-minded thinking and discussion which could help the participants of the research to produce ideas suitable for more than one country. As the focus of the research was on the administrative measures either motivated by the crisis or the actions which may have an impact on it, the respondents were asked to indicate only those actions taken by their country that correspond to this basic assumption. Core questions (on actions done/planned in the public sector HRM): 1. What steps are made/planned by your country in the field of public service personnel costcutting because of the reduction of state revenues? 2007 (reference) 2008 EUR % EUR 2009 % 2010 (estimate) EUR %

No. 1. 2. 3. No. 1. 2.

Cost-cutting measures Decrease of personnel budget Decrease of total remuneration Other (indicate) Down-sizing measures Decrease of number of personnel Other (indicate)

2007 (reference)

Total number

Total number

Total number

Please, provide details on how these measures have been implemented: The sequence and timing of actions of the Government: Current approach to actual downsizing process in particular public sector institutions: The influence on the motivation of civil servants/public sector employees: NB! Please, make clear distinction between initiatives in implementation phase and those in the planning phase. Put emphasis on the initiatives that are actually on-going or completed/implemented. Attach the relevant policy documents or links to relevant information (any language, if not available in English). 2. What steps are made/planned by your country in the field of civil service transformation? Please, name them and describe in more detail: Area Changes 2008-2010 motivated by the crisis Institutional status of civil servants/public service employees Remuneration Social benefits

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

Other (indicate) NB! Please, make clear distinction between initiatives in implementation phase and those in the planning phase. Put emphasis on the initiatives that are actually on-going or completed/implemented. Attach the relevant policy documents or links to relevant information (any language, if not available in English). 3. What are the signals of strengthening/weakening the politicization of the civil service in the light of crisis11? On a scale from 1 to 10, to what extent is the management of senior officials subject to political influence? Senior officials refer to individuals in the top five to six levels below the Minister who usually have some kind of managerial responsibilities. When speaking about political influence, we refer to the extent to which Ministers, the Prime Minister or other political officials effectively determine the appointment, promotion and dismissal of these senior officials in the ministerial bureaucracy. 1 stands here for a minimum of political interference, i.e. Ministers, Prime Minister, etc do not have any influence on the appointment of top officials. 10 stands for the opposite, i.e. Ministers, Prime Minister, etc effectively determine all appointments and dismissals to the top five to six levels in the ministerial bureaucracy. Please cross the appropriate box. Todays general political influence over the management of senior officials Minimum of political influence 1 Maximum of political influence 10

Comment:

Political influence over the management of senior officials in different ministries 2008-2010 Considerably less Much more A bit less political A bit more political political influence political influence influence influence (Two or more Roughly the same (Two or more (One point on the (One point on the points on the scale points on the scale scale above) scale above) above) above) -2 -1 0 +1 +2

Comment:

NB! Please, make clear distinction between initiatives in implementation phase and those in the planning phase. Put emphasis on the initiatives that are actually on-going or completed/implemented. Attach the relevant policy documents or links to relevant information (any language, if not available in English). 4. What steps are made/planned by your country in the field of basic HRM functions of public sector employees/civil servants? Describe any changes in the following areas of HRM implemented in 20082010 as a consequence of crisis or preventative measure to it, based on the following definitions:

11

The following definition and the scale have been used in Expert survey for the SIGMA-OECD project on civil service developments in East Central Europe since the 2004 European Union Enlargement, November 2007.

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

Planning of human resources the planning ahead of the number of personnel required to carry out public administration functions; defining the competencies and skills necessary for the advancement of public services; Recruitment and selection attraction and selection of the personnel necessary to carry out public administration functions; Promotion, transfer, reduction, dismissal the career progression of civil servants/public service employees procedures of promotion, transfer to another position horizontally, reduction (transfer to a lower position), and dismissal; Performance planning and assessment the approach to planning, managing, and assessing the performance of civil servants/public service employees. Performance = what has been achieved (goals, tasks) and the manner how it has been achieved (skills, attitudes, behaviours); Training and development procedures of provision and development of necessary professional qualification and competencies of civil servants/public service employees; Leadership development measures for development of leadership capacity of senior officials; Remuneration the system of remuneration of civil servants/public service employees, including base pay, flexible pay, benefits and perquisites (social benefits). HRM areas and measures HR planning

Period 2008 2009 2010 <

Recruitment and selection 2008 2009 2010< Promotion, transfer, reduction, and dismissal 2008 2009 2010< Performance planning and assessment 2008 2009 2010< Training and development 2008 2009 2010<

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

Leadership development 2008 2009 2010< Remuneration 2008 2009 2010< NB! Please, make clear distinction between initiatives in implementation phase and those in the planning phase. Put emphasis on the initiatives that are actually on-going or completed/implemented. Attach the relevant policy documents or links to relevant information (any language, if not available in English). 5. What institutions are responsible for HRM policy planning and implementation? Have there been any changes in 2008-2010 with regards to responsible institutions, experts policy planners, scope and content of tasks? Please, name them and describe in more detail: Area Responsible institutions Experts policy planners Scope and content of tasks 6. Have the social partners been involved in decision making in the field of public sector HRM policy? Please, describe in more detail their role: Changes 2008-2010 (please, indicate the exact date when changes have been implemented)

Please, indicate the impact of social partners according to the following scale: Impact of the social partners in the decisions making process in the field of public sector HRM 2008-2010 No impact Major impact 1 2 3 4 5

7. Have there been any movements toward centralization/decentralization of decision making and implementation in the field of public sector HRM in the light of crisis? Centralisation/decentralization of decision making and implementation in public sector HRM: direction of change in 2008-2010 Centralisation The same Decentralisation -2 -1 0 +1 +2

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

Please, describe in more detail:

NB! Please, make clear distinction between initiatives in implementation phase and those in the planning phase. Put emphasis on the initiatives that are actually on-going or completed/implemented. Attach the relevant policy documents or links to relevant information (any language, if not available in English). 8. What (if any) programmes/projects financed by any international donors in the field of public sector HRM have been initiated, postponed, or suspended in the light of crisis? Please, name them and describe in more detail: Title of the project Initial start and end dates International donor organisation Status 2008-2010 (started, postponed, ongoing)

9. What were the actions made by policy planners and decision makers in the field of HRM in order to predict the possible consequences of reforms initiated because of economic crisis? Please, name them and describe in more detail:

10. What have been the internal and external communication measures with regards to cost cutting and down- sizing actions? Internal communication measures (to civil servants and public service employees):

External communication measures (to public):

Optional questions (concerning possible impact of the crisis): 1. Have the crisis provoked any innovative approaches to public sector HRM? Please, describe in more detail:

NB! Make clear distinction between initiatives in implementation phase and those in the planning phase. Put emphasis on the initiatives that are actually on-going or completed/implemented. Attach the relevant policy documents or links to relevant information (any language, if not available in English).

Challenges for Public Sector Human Resources Management in the recent Economic Downturn

2. Which measures done by your country in the field of public sector HRM have been the most beneficial from the midterm/long term perspective? Please, describe in more detail:

3. Which measures done by your country in the field of public sector HRM have been the most harmful from the midterm/long term perspective? Please, describe in more detail:

Challenges for Public Sector Human Resources Management in the recent Economic Downturn