Can Kenya afford to launch into the restructuring state-owned enterprises (SOEs) without the requisite capability capacity? The answer is a resounding NO! What are the challenges? And are we ready to face them? On the one hand, we can face reality and take on the responsibility for a transformational change. On the other hand, we can take an ostrich approach and await the change to transform us. Here is the Kenyan experience – our reality - as I see it:
A. The structural adjustment programs (SAPs) of the 1980s and '90s revealed knowledge gaps in organizational development that exist to this day. The restructuring of the 1990s, and subsequent attempts, focused on functional areas (i.e., budgeting, financial control, compensation management, etc.) The restructuring of any organization, public or private, is not about budgeting, financial controls, and job evaluation. Restructuring an enterprise is an organization development (OD) process that must begin with the diagnosis of the whole enterprise. We can borrow a leaf from the business world. The restructuring of the turn-arounds in the business world focused on three organizational dimensions. Sherman and Tichy (1993) identified the three critical dimensions as technical, political, and culture. The objective is to align the three dimensions synergistically to raise the organization's effectiveness and productivity.
On the one hand, the technical and political dimensions are about people (groups, teams, and individuals) who make up the organization. On the other hand, culture is the ingrained organizational behavior owing to the organization's structural systems, functional operations, and relationships. Culture is about "the way we do things here" – it's about customs, practices, and habits.
Any restructuring process that does not address all the three dimensions, namely, the groups/teams, individuals, and the organization's structural systems, is bound to fail. The structural adjustment programs (SAPs) of the 1980s/'90s failed because they focused on functional areas rather than organizational development areas.
B. Kenyans are familiar with cases of failed OD projects in the public sector. The failures provide compelling reasons for a reality check and learn how to act appropriately to avoid them in the future. Here are just a few examples of Kenya's failed projects:
A job evaluation exercise at Kenya Wildlife Service (KWS) in the early 1990s took eleven months. However, the exercise results proved unimplementable. The runner-up firm in the tender process took over and spent another eleven months on the job but failed to deliver acceptable results. A job that should have taken not more than six months, at the cost of less than three million Kenya shillings at the time, took over twenty months, at the cost of more than thirty million Kenya shillings. Finally, a team from the Directorate of Personnel Management (DPM) took on the job and failed to deliver. Neither did the two international firms nor the DPM had the requisite skills to conduct the job evaluation exercise.
The IMF-World Bank sponsored restructuring at Kenya Railways Corporation (KRC) in the 1990s was experimentation that, in the end, proved unsatisfactory for Kenya. The restructuring had focused on the corporation's financial performance, technical systems operations, and management structures. According to an insider, the pre-determined outcome was to privatize the state-owned corporation where a preferred investor came from one of the three countries the lenders had identified. A South African company emerged as the winner. The arrangement was to privatize the most profitable functions of the corporation, leaving the government to carry on with the expensive operations. Eventually, the deal proved unsatisfactory.
The lack of the requisite capability capacity contributed to other projects' failures in the public sector. A few examples should drive my point home:
The job evaluation exercise of 2004 for the Civil Service. The exercise failed because the consultant used an inappropriate job evaluation method. The point rating method which the consultant used is appropriate for operatives and non-managerial jobs.
The Akilano Akiwumi tribunal, which the 10th Parliament appointed in 2009 to "update the remuneration structures for the Members of Parliament (MPs), and the employees of the National Assembly."
The tribunal adopted an unorthodox method of collecting views from the public. The public had neither the knowledge nor the ability to contribute constructively to a complex OD activity of setting remuneration structures. None of the tribunal members had the requisite capability for setting remuneration structures.
The job evaluation exercise of 2011 in the Ministry of Public Service in the Prime Minister Office. Curiously, the exercise was to cover "Jobs in Group 'P' and above in the civil service and the equivalent levels in the Kenya National Assembly, the Judiciary, Kenya Anti-Corruption Authority, and other selected Public Agencies." There is no evidence to show the results of the exercise.
In August 2012, the Salaries and Remuneration Commission (SRC) commissioned a job evaluation exercise as a basis for setting remuneration structures for the public sector.
The public sector's rising wage bill was also of concern. At that time, I wrote to the SRC:
Since the 1980s, when the public sector's wage bill became an issue, there has not been the will to arrest and tame the 'wage bill beast.' The desire to create a lean, well-compensated, and highly effective civil service – and by extension, the public sector – has remained just a desire. There can be no escaping from reality: until the public sector has the requisite capability-capacity to manage the broad issues of both the wage bill and remuneration structures, little will change.
The idea that the SRC's job evaluation exercises can arrest the rising wage bill is fundamentally flawed. First, the total effect of a job evaluation exercise is to raise the total wage bill. Secondly, the SRC uses the factor comparison method, which is suitable only for factory and low-level non-managerial jobs. Furthermore, job evaluation does not set remuneration structures, nor does it determine the level of the wage bill for the organization - the purpose of job evaluation is to eliminate or reduce disparities in a compensation structure in an organization, and not across different organizations as the SRC proposes.
In collaboration with other stakeholders, my suggestion is for the SRC to first determine the sustainable level for the public sector's total wage bill. Then, based on the acceptable wage bill level, determine whether a 'living wage' (as has been done in some countries) could be the baseline for the minimum pay levels acceptable for the public sector – considering all the other factors like the Collective Bargaining Agreements (CBAs).
In this case, the SRC and other key stakeholders in the public sector could do the following:
Commission job rationalization (the need and purpose for each job) and conduct a job audit exercise, where necessary, to ensure that the wage bill was for actual, existing, and necessary jobs – (i.e., justify the need for every job and eliminate ghost workers). Get all the stakeholders on board when crafting policy decisions on salaries according to the agreed-upon sustainable wage bill levels.
Incorporate in the process and plan for the forty-seven counties after these are fully constituted and rationalized (the county governments were not in existence in August 2012).
Set compensation levels for all job categories based on a sustainable wage bill level.
Use job evaluation to remove any disparities in the compensation structures.
Undertake capability-capacity building in wage bill management and skills in job evaluation and remuneration structuring as a long-term strategy.
The SRC proceeded to commission job evaluation exercises. By the end of 2015, the public sector in Kenya had lost, by a conservative estimation, over one billion Kenya shillings on job evaluation exercises that were impossible to implement.
A new team of the Salaries and Remuneration Commissioners took over on September 26, 2018. The 'WAGE BILL BEAST' remained the biggest challenge facing the public sector and taming the 'wage bill beast' required for the SRC to deploy resources and intellectual capital well beyond its capabilities.
On November 26, 2019, the new team held a National Wage Bill Conference at Kenyatta International Convention Centre. At the conference, whose theme was "Transforming Kenya's Economy through a Fiscally Sustainable Public Wage Bill," experts presented and discussed technical papers on various thematic areas.
According to the SRC's website: The conference brought together key stakeholders from the national and county governments, the private sector, civil society, and other non-state actors. Local and International speakers also shared their experiences on wage bill management. The conference themes were:
Mainstreaming productivity in the public service;
Mainstreaming performance management in the public service;
Strengthening labor relations for National Wage bill sustainability;
Managing the wage bill through an optimal and efficient public service;
Mainstreaming work ethics to achieve productivity in the public service;
Managing public sector pension liability; and
Strengthening the Remuneration and Benefits policy for a fiscally sustainable wage bill.
Realistically, the process of taming the 'wage bill beast' can be a long one. It requires a thorough organizational diagnosis and analysis. The conference on the national wage bill failed to offer the means to control the rising public sector's wage bill.
The SRC had come onto the scene only to find a fractured system in need of fixing but lacked the capability capacity to do so. The Kenya government already had a blueprint plan for controlling the rising wage bill in the public sector. The Civil Service Reform Program of the late 1990s had identified, among other things, the need to:
Rationalize ministerial functions and structures
Rationalize staffing levels in the public sector
Manage the public sector's wage bill efficiently
Carry out comprehensive pay and benefits reforms
Institute performance improvement initiatives; and
Undertake training and capacity building for the public sector.
My submission is that the SRC's mandate was circumscribed by item number 4 on the blueprint, which was to "carry out comprehensive pay and benefits reforms". All the other areas, including the management of the wage bill, were the employer's responsibility.
For the SRC to succeed where others have failed, the Commissioners will have to get their bearings right. There are no shortcuts. This means that the SRC recognizes it lacks the tools and cannot determine the level at which to maintain the total wage bill. It is only the employer who can arrest the rising wage bill. This could mean several things, including but not limited to:
Restructuring the public sector to remove unnecessary layers, duplications, and the over-staffed government ministries, departments, and counties.
Rationalizing independent commissions and Constitutional institutions to reflect the real needs to constitute them.
Restructuring elective offices at both national and county levels to remove unnecessary overrepresentation.
The responsibility for these activities is well beyond the SRC's mandate. Equally valid, the responsibility for the total wage bill for the public sector is well beyond the SRC's mandate.
There are forty-seven (47) counties in Kenya. Each of them is economically dependent on the National Government. The county governments should, as a minimum, be capable of paying their employees' salaries using county resources. Otherwise, their existence remains tenuously at the behest and patronage of the Executive. One way to avoid such a predicament is to create viable economic regions where the regions are responsible for their recurrent expenditures, including salaries and wages for their employees. Economically independent counties would be more sensitive to how they allocate and spend their resources.
Kenya could learn from the following countries that have regional or state governments: The United States of America, with 50 states, is 17 times larger than Kenya (Kenya is about the size of Texas). Canada, with ten provinces, is also about 17 times larger than Kenya. With 28 states, India is about six times larger than Kenya, while Ethiopia, with nine ethnically-based states (regions), is about 1.9 times bigger than Kenya. The difference between the states (or regions) in these countries and the county governments in Kenya is that most of them can finance their recurrent expenditures. Ethiopia's regional governments are capable of financing up to 40% of their budgets. Globally, provincial or state governments can finance up to about 65% of their recurrent expenditures.
With economically viable zones, Kenya can drastically bring down the public sector's total wage bill. The challenge here is for the leadership to face reality: either do nothing because the current structural systems serve personal interests or create structural systems for efficient and effective delivery of services – the core responsibility of the public service, especially the civil service.
Yes, I understand: A transformational change can be unbearably painful. We may prefer burying our heads in the sand and hope the change comes and passes!
References
Ministry of State for Public Service, (January 2011). Request for Expression of Interest: Undertaking of Job Evaluation in the Public Service. http://www.kenyancareer.com/2010/12/undertaking-of-job-evaluation-in-public.html
Office of the President (2005, April). Public Service reform and development secretariat. Donor/GoK consultative meeting. Retrieved December 9, from siteresources.worldbank.org/INTKENYA/Resources/psrd_sec_rpt.pdf
Sherman, S. & Tichy, N. M. (1993). Control Your Destiny or Someone Else Will. Harper Collins Publishers, Inc., New York.
The SRC (2019, November 26). SRC Holds the National Wage Bill Conference. Retrieved April 3, 2020 from https://wagebillconference.go.ke/