U3A1-24 - Identify and Describe the New Service and Competency Inventory within the Public Organization...see details

CHAPTER4TheHRRoleinPolicyBudgetPerformanceManagementandProgramEvaluation.docx

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CHAPTER 4 The HR Role in Policy, Budget, Performance Management, and Program Evaluation

The conceptual model in Chapter 3 explains how an organization can remain relevant by responding appropriately to environmental change and uncertainty in ways that reflect strategic thinking about human resources. However, here, as elsewhere, analytical integration comes at the price of operational clarity. Chapter 4 links this conceptual model to the real world by describing the sequential processes by which ideas become programs. These are policy making, budgeting, performance management, and program evaluation.

Issues become part of a public agenda through the policy process. This process is chaotic and unpredictable, for it involves the serendipitous convergence or “coupling” of agendas, alternative solutions, and politics, all leading to government action.1 During this process, problems become public policy issues; these issues are framed by competing political agendas; legislatures authorize and chief executives approve policy solutions as law and fund them through a budgeting process. These policy and budget processes are the headwaters of public personnel management because they all lead eventually to paying people to do things.

Human resource planning (HRP) is that aspect of public HRM that mediates between the political environment and managerial implementation of public programs through core HRM activities such as workforce planning, job analysis, job classification, job evaluation, and compensation. In brief, HRP matches agency managers’ “wish lists” with political realities generated by projected revenues and political philosophies and goals within a much broader context of factors like the supply and demand for labor. For the line manager, the process begins with a request from the budget office: “What kind and how many positions do you need in order to meet program objectives?” In many cases, this request is preceded by some kind of strategic planning process that helps establish priorities and goals. It ends with legislative authorization of programs and appropriation of funds required to implement them.

Program implementation leads to performance management and program evaluation. Many interests—political, administrative, and clients are but a few—influence how an agency’s performance is measured, and how those measurements affect program evaluation. While decisions about a program’s continued funding are based on both political and administrative criteria, data-driven decisions are only possible if the agency has a management information system that can provide valid and timely information about program performance. Because pay and benefits typically comprise about 70 percent of an agency’s budget, an HR manager who can provide valued information about the costs and benefits of alternative methods of public service delivery can be a valued member of the leadership team responsible for making these decisions.

By the end of this chapter, you will be able to:

1. Explain how policy making, budgeting, performance management, and program evaluation are critical to managing public agencies.

2. Describe the HR manager’s role in supporting these processes.

3. Explore the difficulties of defining and managing organizational performance in contemporary public service delivery options such as contracting and privatization, public–private partnerships, and organizational networks.

4. Tell how to enhance the role of public HRM management by using data-driven performance management and program evaluation to resolve issues of productivity and privatization.

POLICY MAKING, BUDGETING, PERFORMANCE MANAGEMENT, AND PROGRAM EVALUATION

These core management functions are how organizations develop programs, allocate resources to them, and benchmark their effectiveness.

Policy Making

The American democratic system of government has a constitutional structure that guides and constrains policy design. Policy making is the process by which all levels of government make and implement policies. Many experts use a six-stage model to describe the process: initiation, estimation, selection, implementation, evaluation, and termination. Under this model, policy issues initiate with elected officials and the general political environment comprising interest groups, issue networks, and the media. Initiation and estimation both involve how issues are framed (defined or perceived). Once approved through a legislative and executive process, agencies implement them as legal responsibilities, within appropriated funding limits. Periodic evaluations are the basis for future funding. Either the legislative or the executive branch can terminate a program by refusing to renew the enabling legislation, or by not appropriating funds for it.

Being able to analyze policy making as a six-stage process may make it easier to study, but it does not make it easier to understand in practice. Rational, linear models simply cannot include all the imponderable pressures and events that enable issues to advance to the top of politicians’ agendas, or to become important to voters.2 In the pharmaceutical industry, researchers sometimes develop drugs and then accidentally learn what diseases they can cure. The serendipitous discovery that penicillin kills infectious bacteria was actually a solution in search of a problem. Viagra and similar drugs were originally developed to treat high blood pressure. Their marketing and use changed dramatically once male users reported the drug’s unanticipated side effect. In similar fashion, policy solutions often languish until they match with an appropriate problem. For example, victim restitution and community-based treatment of nonviolent offenders have always been possible solutions to crime. However, they become politically feasible only after politicians and the public confront the high cost and low effectiveness of lengthy prison sentences. Thus, policy making incorporates both rational and nonrational elements. It relies on defining events like 9/11, tipping points at which people will favor small hybrids instead of large SUVs, changes in available technology, and other unpredictable factors.3

Budgeting

A budget is a document that attempts to reconcile program priorities with projected revenues. It combines a statement of organizational activities or objectives for a given time period with information about the funds required to engage in these activities or reach these objectives. Historically, the most important purpose has been external control. A ceiling budget controls an agency directly by specifying limits to expenditures through appropriations, legislation, or indirectly by limiting agency revenues.

Other types of budgets have different purposes. A line-item budget, which classifies expenditures by type, is useful for controlling types of expenditures as well as their total amount. Performance and program budgets are useful for specifying the activities or programs on which funds are spent, and thereby assist in their evaluation. By separating expenditures on the basis of function (such as health or public safety) or type of expenditure (such as personnel and equipment) or by source of revenue (such as property tax, sales tax, or user fees), administrators and legislators can keep accurate records of an agency’s financial transactions for the maintenance of efficiency and control.

Because program approval and appropriations are related, policy making and budgeting involve many of the same participants. Interest groups exert pressure on administrators and legislators to propose or expand favorable programs. Department administrators use these pressures and their own sense of their department’s mission, goals, and capabilities to develop proposals and specify the resources (money, time, and people) needed to accomplish them. Chief executives coordinate and balance the requests of various departments. After all, resources are limited and departmental objectives should be congruent with the overall objectives of the city, nonprofit agency, or state or national government. In many cases, the chief executive has a staff agency responsible for informing departments or agencies of planning limitations, objectives, and resource limits. In smaller jurisdictions, the chief administrative officer individually may perform this coordinating function. In addition, in other cases, there may be a budget task group or department representatives that cooperatively seek to align budget requests with revenue forecasts. The chief executive or chief administrative officer presents the combined budget request of all departments within the executive arm to a legislature or board (city council, county commission, nonprofit board, state legislature, or Congress).

Legislative action on appropriations requests varies depending on the legislature’s size and the staff’s capabilities. At the national and state levels, committees consider funding requests from various agencies. These committees examine funding requests in the light of prior expenditures, testimony from department heads and lobbyists, and the committee members’ own feelings about the comparative importance of the agency’s programs and objectives. Appropriations requests are approved when the committee agrees on which programs should be funded and on the overall level of funding.

In an elementary view, after new programs are authorized, funded, and signed into law, the executive branch is responsible for executing them. The chief executive is responsible for administering the expenditure of funds to accomplish the objectives intended by the legislature; department administrators are responsible for managing their budgets and programs accordingly. Financial management is the process of developing and using systems to ensure that funds are spent for the purposes for which they have been appropriated. Through an accounting system, each agency keeps records of financial transactions and compares budgets with actual expenditures. Agency managers engage in financial management when they take steps to limit expenditures, transfer funds from one budget category to another to meet program priorities, or borrow or invest idle funds.

Audit, the last step in the budget cycle, is the process of ensuring that funds were actually spent for the intended purpose and in the prescribed manner. Controller’s offices inside the organization, and auditors outside, review expenditures for compliance with legislative mandates and prescribed procedures. In the case of waste, fraud, and abuse, agencies may be required to return funds and responsible officials may be subject to organizational reprimand and criminal prosecution by state authorities.

Figure 4-1 shows the process of budget preparation, approval, and management. This process is a recurrent ritual whose frequency depends on the length of the appropriations cycle. Most governments budget annually, although the problems associated with continually developing and evaluating programs have led some states to develop biennial budgets (every two years). In the typical annual budget cycle, an agency or a department is normally developing the next year’s budget a year in advance of the period for which it is requesting funds. At the same time, it is also evaluating programs from the prior year. Although most governments follow an annual cycle, their budget years begin and end on different dates. For most state governments their fiscal year begins on July 1 and ends on June 30, while the federal government’s fiscal year begins October 1 and ends September 30. Other governments follow the calendar year, January 1 to December 31.

Budgeting can be viewed politically as a contest among opposing agencies for scarce resources, organizationally as the formal set of policies and procedures that govern the approval process, or informally as a ritualized interaction among the conflicting expectations of program managers, political executives, legislators, and lobbyists. The less revenue available, the more contentious the budgeting process, with access to legislators and legislative committees—a scarce resource. Furthermore, where antigovernment emotion infuses legislative sessions, the stakes are high for agency administrators who see their agency’s programs threatened with reduction, elimination, or transfer to the private/nonprofit sectors. Budgeting then becomes much more “political,” in that decisions are made more on philosophical inclination or particularized interests than on rational and analytic planning that administrators are more comfortable with.

Performance Management and Program Evaluation

Because decisions on future funding for programs and agencies are likely to involve an evaluation of past performance, performance management becomes a critical part of the planning process. It is complex because the criteria used for program evaluation differ across different users, and the measures vary with the interests involved. The important thing to remember is that performance measure generally shifted from evaluation of inputs (expenses) by means of audits to evaluation of program outcomes by performance measures. That is, regardless of whether an agency spent its money in accordance with the appropriations law, or whether the program achieved its predicted results, and if those results contributed toward solving the policy issue at hand.

Various terms like output, performance, efficiency, effectiveness, and bang for the buck are commonly associated with productivity. Technically, productivity concerns two specific assessments of performance. First, efficiency is a ratio of outputs to inputs. Measuring efficiency requires identifying a performance outcome (such as the number of lunches served in a school cafeteria or the number of arrests made by a police department), and identifying the resources used to produce the outcome such as employee hours worked or funds allocated. The efficiency ratio then becomes:

Number of meals served or

Number of cafeteria employee hours worked

Number of arrests or

Police department personnel costs

Efficiency can increase either by increasing the number of meals served with the same number of employees, or by serving the same number of meals with fewer employees. However, what if we served more meals, yet the meals were unappetizing and not fully consumed? What if arrests failed to lead to convictions and instead crowded the courts? Could we say that productivity had improved? Probably not.

Productivity, then, also implies effectiveness, a concern with the quality of the output measured against some standard. Thus, a more valid productivity measure would incorporate a performance quality issue, such as:

Number of meals consumed or

Number of cafeteria hours worked

Number of arrests leading to conviction or

Police department personnel costs

Thus, concerns for efficiency focus attention on input–output ratios and answer the question, “Are we getting the most for our money?” Implied in this question is the effectiveness concern, “Are we accomplishing the goal we set out to accomplish?”

On top of this pyramid of questions is a responsiveness question, “Is the goal we set out to accomplish worthwhile in light of the other goals we might have chosen?” In the cafeteria example, the responsiveness question might have been, “Do we want to invest public money in school lunches or library books?” Once this question is answered, the school district can attend to the effectiveness and efficiency questions. The responsiveness question is difficult to answer because it requires stakeholders to explicitly clarify their outcome preferences and the values that underlie them. In many cases, an agency will not implement programs based on efficient or effective solutions to a problem because those programs run counter to the assumptions and values of key stakeholders. For example, preventing the spread of AIDS and other sexually transmitted diseases is a significant objective of many state and county public health systems. Two efficient and effective solutions are distributing condoms in prisons and providing intravenous (IV) drug users with clean needles or teaching them to use bleach to clean their own “works.” However, implementing either solution is not possible in the current political environment because key stakeholders—elected officials and the interests they represent—consider that publicly accepting that sexual activity does occur in prisons or use of IV drug does occur among the general population means that they implicitly condone these practices, or at least that political opponents may effectively accuse them of this.

In practice, resolving political responsiveness issues means recognizing the differences between rational/economic and political/social perspectives on policy making. From a rational/economic perspective, an effective solution is one that cost-benefit analysis (CBA) shows has financial benefits greater than its costs. For example, investments in prenatal and newborn medical care produce benefits many times greater than their costs. Based on risk assessment, it is economically irrational to spend money to mitigate air pollution if the costs of mitigation programs are greater than the calculated value of the human lives lost by premature death or disability caused by air pollution. Yet, actual policy may run counter to these recommendations because a political/social perspective controls outcome assessment. For example, our current health-care system is based on third-party benefit policies that encourage relatively high investments in health care at the end of life and relatively low ones at the beginning. In addition, air pollution control policies are often based on the absolute value of human life rather than the relative risk of death from pollutants.

Because the responsiveness question requires explicit value judgments resulting in winners and losers, governments frequently focus on efficiency questions aimed at saving money. It is easier and more popular to ask why the school superintendent is making $180,000 a year than it is to determine whether the school district should be hiring more teachers or buying more computers. Critical responsiveness questions are often avoided until losses in service become so obvious that explicit discussions of political priorities must take place.

HOW THE HR MANAGER SUPPORTS THESE PROCESSES

The primary role public personnel managers play in the policy-making process combines their staff responsibility of assisting other department heads and their line responsibility of directing their own departments. Their staff responsibility is to work with department heads so they can realistically predict the human resource needs of various program options. In this role, they function as neutral experts. Their second role in the policy-making process is to provide input—again as neutral experts—on the positive and negative consequences of alternative policy options for staffing needs in their own departments. For example, a decision to contract out a particular service may result in reduced staffing needs for the agency responsible for that program, but increased contract negotiation and compliance responsibilities for the HR department.

Public HR managers play a similar staff role in the budget process. First, their staff responsibility is to work with department heads so they can realistically predict the pay and benefit costs associated with alternative program delivery options. In addition, they ensure that requests will conform to personnel policy and practices and will reflect the hiring or downsizing needs of agencies. For example, a city police chief may have received a mandate from the city council to “cut crime.” Translated into budget terms, this may mean that the council is willing to allocate additional money to hire more police officers. Working with the chief executive officer and the personnel and budget departments, the police department will analyze staffing; examine the classification scheme to determine the salary associated with each new position; and determine total costs including wages, benefits, uniform allowances, recruitment, training, and equipment. Then the department will develop a request reflecting the combined analysis and possibly the political realities of the budget process in order to anticipate the city council’s reaction. The police chief will submit the request to the city manager (or mayor), who then reviews it against other council priorities and revenue projections and forwards it to the council, or appropriate council committee, as part of a total proposed budget. The HR director’s second budget preparation function is to develop and defend the budget needed to provide personnel support services (such as recruitment and selection, job analysis and classification, operation of the payroll and benefits system, training and orientation, performance evaluation, grievances and disciplinary action, and collective bargaining) to other departments.

Because pay and benefits constitute such a large proportion of an agency’s budget, both HR managers and budget officers are heavily involved in budget management throughout the year. Agency managers and supervisors play the primary role because they are responsible for controlling and reallocating human resources to meet program priorities within budget constraints. Agency personnel managers respond to the priorities set by managers by filling positions, paying employees, and otherwise implementing their decisions. However, they also monitor accident rates that affect worker compensation premiums and use of health-care benefits for their impact on future insurance premiums. In a cutback situation, agency personnel managers may have to help prepare plans to reduce personnel expenditures. These plans commonly include freezes on hiring and promotions and cutbacks on hours worked, proposed reductions in benefits, and the replacement of permanent workers with part-time or temporary employees.

Public HR managers also play a critical role in productivity improvement by monitoring the efficiency or effectiveness of program outputs compared with personnel costs, or departmental compliance with legal requirements. Table 4-1 shows examples of using an HRMIS for data-driven strategic performance measurement.

Here again, their role is secondary to that of program managers and supervisors, who are directly responsible. 4 Effective HR oversight over performance management is indirect. It means making sure that managers and supervisors apply valid effectiveness measures and reduce agency exposure to financial and legal liability. This means that the HR manager’s focus should be strategic rather than operational. 5 However, in reality, it is extraordinarily difficult for HR directors to avoid being drawn into departmental personnel issues because individual personnel actions, when considered together, comprise the conflict between competing values, objectives, and demands. 6 Their understandable tendency is to react immediately and concretely to requests for individual personnel actions from agency directors or other elected and appointed officials, rather than by viewing and responding to these requests in a way that more adequately reflects their strategic oversight responsibilities. The HR department may also engage in “firefighting” because its existing management information system does not allow more strategic and data-driven decision making.

An example of the linkages between budgeting, productivity, and a human resource information system might focus on whether cost reductions can beneficially occur through an early retirement program. The pension costs, lump-sum payouts, payouts for sick leave, and loss of valued competencies have to be weighed against the lower salaries and benefits of younger workers who might need to be added. 7 Recruitment, selection, and training costs of newer workers have to be calculated as well, along with the newer knowledge that they might bring to the workplace.

TABLE 4-1

HRMIS Applications to Program Evaluation

Activity	HRMIS Applications
*PLANNING*
Human resource planning	Compile inventory of current employees’ skills; determine whether these meet forecast future needs
Job analysis and classification	How many employees are in different occupations?
Compensation	Determine current pay and benefit costs for all employees; project the cost of alternative proposed pay and benefit packages, online benefits enrollment, and monitoring
*ACQUISITION*
Affirmative action	Compare actual utilization of particular groups with their representation in the labor market; assess organizational affirmative action plan compliance
Recruitment	Compile new hire estimates based on anticipated staffing needs; Are current recruitment efforts sufficient to meet them?
Selection	Do an applicant’s qualifications meet minimum standards for a given position?
	Do selected applicants meet performance standards for their positions?
*DEVELOPMENT*
Productivity	Record performance of organizational units; compare to other units or previous time periods
Performance appraisal	Record employee performance; compare to other employees, performance standards, or previous time periods
Training and development	Summarize training activities and costs; assess training needs by comparing skills; assess OD needs by measuring organizational climate
Employee motivation and job design	Measure employee productivity, turnover, absenteeism, and internal motivation; assess effect of changes in job design on productivity and motivation
Safety	Record injuries, accidents, and illnesses; use these data to change safety regulations, selection critiera, or employee orientation
*SANCTION*
Labor–management relations	Collect and compare salary and benefit data against that of other positions or jurisdictions; compute the cost of proposed changes in pay and benefits
Discipline and grievances	Compile reports on the number and type of grievances and disciplinary actions; use these data to recommend changes in work rules, employee orientation, or supervisory training
Constitutional rights of employees	Record cases of sexual harassment or civil rights violations; use these to improve affirmative action compliance, employee orientation, or supervisory training
*CONTROL AND ADAPTATION*
Evaluation	Collect data through HRMIS to evaluate all public personnel management activities

MANAGING CONTEMPORARY ORGANIZATIONAL PERFORMANCE

The governmental response to revenue shortfalls draws attention more broadly to the productivity of public agencies.

Broadly speaking, programs that offer productivity programs seem to cluster into three areas. The first area includes those programs that traditional HR directors commonly propose and manage:

•Job simplification

•Job enrichment, employee empowerment, and use of teams where appropriate

•Incentive awards

•Increased sophistication in training

•Competency-based hiring, training, and appraisal methods

•Specification of work standards

•Increased office communication, team building, and organizational development

•Total quality management

•Alternative work schedules

The second area is predicated on increased use of technology. Its implementation thus requires the HR director to work cooperatively with other members of a management team (e.g., capital budget directors, financial managers, cost-benefit analysts, and information and communications technologies (ICTs) specialists):

•Labor-saving capital equipment shifting from three- and two-person sanitation crews to a one-person side-loaded truck

•More sophisticated software in areas like record keeping, payroll, and billing along with an integration of financial and human resource information databases.

•Electronic tools for scheduling, tracking of projects, and early warning of problems

The third set of projects and innovations involve changes in organizational structure, processes, and operating procedures. Their implementation requires not only the cooperation of other members of a management team, but also the support of elected and appointed officials whose policy and budget decisions reflect basic choices among interacting public HRM systems and their underlying values:

•Privatization

•Contracting out

•Substituting temporary and part-time employees for career employees

•Reduction-in-force

•Flexibility in civil service procedures

•Selective decentralization or reorganization into homogeneous units

•Increased use of performance measures and work standards to monitor productivity

•Consolidation of services

•Use of economic-rational decision models for scheduling and other problems

Thus far, we have been discussing productivity from the perspective of a single agency. This perspective is natural because classical organization theory and definitions of effectiveness were defined from the perspective of a single focal organization. 8 Yet public–private partnerships that involve the use of contractors or privatization means an increase in the number of organizations involved with service delivery and complicate traditional notions of accountability between elected officials and administrators. For example, the contracting out of foster-care services in Kansas illustrates how market-based challenges to traditional political and administrative perspectives complicated expectations of accountability. The result was a situation where the challenge of accommodating three crosscutting expectations of accountability (derived from the three competing perspectives of politics, administration, and markets) made the already-complex job of public management even more difficult. 9 For another example, the use of private contractors (e.g., Blackwater or Halliburton in Iraq) to supplement uniformed military and civilian government employees raises similar issues of Congressional oversight and accountability. 10

Today, the context of performance management is likely to comprise networked transorganizational systems. 11 The activities defined as boundary spanning from the perspective of a single organization relating to its environment are more likely to be viewed as internal communication and information exchange from a network perspective. Effective public policy responses require coordinated flows of information, decision making, and program implementation within a network of organizations representing different levels of government (local, state, national, and international) and different sectors (business, government, and community-based organizations. 12 It was the lack of network effectiveness as much as the lack of individual organizational effectiveness that led to ineffective responses to Hurricane Katrina. In sum, the locus for evaluating effectiveness has shifted from the individual organization to the network, and the criteria for outcome evaluation have shifted from organizational effectiveness to network performance. 13 Public administrators in general, and public HR managers in particular, must focus on issues like interagency effectiveness, multilateral accountability, organizational culture, and personal ethics generated by conflict and collaboration across sectors and levels of government. 14

ENHANCING THE HR MANAGER’S ROLE IN PRODUCTIVITY AND PRIVATIZATION DECISIONS

Because they enable an agency to measure performance accurately and to rationally predict the costs and benefits of alternative methods of delivering public services, HRMIS is crucial to managerial and political decisions about what services the government should provide and who should deliver them. Why should a city government collect trash when a private vendor could do the same? Why should the government manage lodging and concessions in public parks when private businesses could do the same? In fact, in the federal government, each agency or department is required annually to provide an analysis of which HR activities could be outsourced and which are inherently governmental.

These examples highlight the most popular form of privatization—contracting with private business to deliver the services that governments have been providing.15 It may result in the abolition of the agency (at times an intended ideological goal). Privatization offers all the advantages of service purchase agreements but holds down labor and construction costs on a larger scale. It has become commonplace in areas like solid waste disposal where there is an easily identifiable “benchmark” (standard cost and service comparison with the private sector), and where public agency costs tend to be higher because of higher pay and benefits.16

Governments have contracted with private business for services like street construction and repair, tree trimming and planting, ambulance service, vehicle towing and storage, building and grounds maintenance, data processing, legal services, and tax bill processing.17 HR directors are not the primary decision makers on this issue. Elected officials, agency heads and staff, chief administrative officers, and department heads lead the discussion. Yet in their role as mediators and experts, HR directors are often asked to assess the pros and cons of privatization, especially as it affects the workforce. How should they respond to such requests? Fortunately, they can do so as neutral experts, based on a wealth of available research on privatization’s parameters, pros, and cons.18

Other, more sweeping examples of privatization abound. For example, the new city of Sandy Springs, Georgia, has virtually no permanent employees. It contracts with an engineering firm to provide nearly all services except police and fire which it contracts with the county. The city manager reports that administration is easier than will an array of full- and part-time employees. If there is a serious personnel problem, the manager or department head simply tells the contract manager from the engineering firm, and that person takes care of it.19 Similarly, some years ago in Santa Clarita, California, the city manager told one of the authors how much easier it was to contract with the L.A. County Sheriff’s department for public safety services than to administer the city’s own police force. The big issue for him was “no union negotiations.” Moreover, virtually all the officers knew the city because they lived in the San Fernando Valley. The police chief was treated and acted like a permanent department head.

Chandler and Feuille identify four characteristics of the services most frequently contracted for by local governments: (1) there is no compelling reason that government deliver the service, (2) a number of private-sector firms could usually supply the service, (3) the service usually requires low levels of skilled labor, and (4) outputs are usually easy to monitor.20 Siegel, summarizing twenty years of state and local governments’ experience, concludes that privatization and service contracting outcomes are most likely to be successful when governments:

•Pick a service with clear objectives that can be measured and monitored.

•Use in-house or external competition and avoid sole-source contracting.

•Develop adequate cost accounting systems to compare service alternatives and monitor contractor performance.

•Consider negative externalities such as impacts on an existing workforce, impacts on the local economy, other governments or functions, governmental policies, or certain societal groups.21

Privatization’s impact on productivity has been mixed. Advocates claim that contracting out frequently saves public dollars because competing firms are more likely to provide services more efficiently than government monopolies. They highlight the savings that can be achieved through economies of scale. For example, while one city may be unable to purchase an expensive piece of equipment to repave streets, a private company with contracts to several cities could. They also point out that private companies have more flexible personnel practices, allowing them to hire and lay off employees easily and save money with less generous wages and benefit packages and with more temporary and part-time employees. Moreover, they attribute productivity increases to a change in public agency culture toward identifying customers and providing market-based services.22

Critics assert that privatization may result in cutting corners to maximize profits, provide incentives to deal only with clients who are easy to serve, increase the risk of graft and corruption, and reduce the capacity to deliver the service if privatization does not work.23 Another concern is that the flexibility accompanying privatization may release the private firm from obligations to follow open meetings laws and open records acts. Further, privatization creates collaborative networks that diffuse accountability. Whom do citizens hold accountable when they are dissatisfied with a service the government outsources?24 Moreover, the personnel techniques that have become more common under these emergent systems may actually increase some personnel costs, particularly those connected with employment of independent contractors, reemployed annuitants, and temporary employees.25 Downsizing may eventually lead to higher recruitment, orientation and training costs, and loss of the organizational memory and “core expertise” necessary to effectively manage contracting or privatization initiatives.26 Minimum staffing usually results in increased payment of overtime and higher rates of employee accidents and injuries. As the civil service workforce shrinks, it is also aging. This means increases in pension payouts, disability retirements, workers’ compensation claims, and health-care costs.

In addition to its impact on productivity, productivity remains controversial because it involves the reallocation of jobs from the public to the private sector. This brings values and personnel systems into conflict and highlights the inherently political underpinnings of public HR policy and administration. For example, those responsible for finances may favor contracting out as a way of averting a costly union contract and work rules. However, the loss of public jobs invites the political displeasure of employee unions. Even though the private contractor would hire many public employees, unions object strenuously to contracting out because their members will usually find themselves with lower wages and benefits even if they keep their jobs.27 Social equity may suffer as women and minorities who benefit from gains in government employment find themselves at a disadvantage with employers less commitment to affirmative action and merit.28 Moreover, private employers are under no obligation to provide constitutional protections to their employees or to the clients they serve.29

Enthusiasm for productivity improvement in government opens opportunities for an expanded role for the HR manager. The price for entering this decision-making arena is expertise that those involved in productivity projects will value and subsequently search out. This involves knowledge of technical operations and service delivery options and the ability to apply knowledge of the applied behavioral sciences to issues of performance management, productivity improvement, and privatization.30 Knowledge of the applied behavioral sciences is becoming increasingly valuable considering the impact that productivity decisions have, especially those involving privatization and downsizing, on workforce morale and commitment. Understanding organizational change processes; the conditions that ease adaptation to change; the conditions that produce resistance to change; and the competence to deal with uncertainty, conflict, and anxiety are qualities of the effective HR manager as case study three at the end of the chapter shows. Academically, this knowledge is found in the social sciences: psychology, sociology, anthropology, social psychology, communication studies, and political science. The application of social science knowledge to real-life problems often is referred to as applied behavioral science (ABS). In the federal government, the extensive research by the Office of Personnel Management and the Merit Systems Protection Board into federal employee attitudes and the effectiveness of pay for performance fall into this category of expertise.

April 5, 2008

To:	John Nalbandian
Fr:	Department Head
Re:	Downsizing

As organizations “thin” and the competition for scarce public jobs increase, the process of filling vacancies that are retained in the budget becomes a war within the organization. If the position is actually re-budgeted and advertised, the competition for this public job now creates a large number of applications. Many times, individuals with real qualifications for the position are at a premium due to private-sector competition. Other applicants will cite that local residency, community knowledge, and even friendship with staff or local officials should outweigh required job skills. Thus, often we are confronted with a selection process with many wrong solutions and few win-win outcomes. The result will often be a political or legal challenge to the selection decision. In addition, many public organizations are losing the “in-house generalists” in the middle management ranks of the organization through the thinning of the organization. These individuals began their careers in very technical areas. However, due to tenure, career advancement, and program needs, they have grown into positions of mid-management and effectively operate the organization day-to-day. These positions are exactly those that are at risk in each budget cycle. In an attempt to reduce personnel costs, we quickly rule out department heads, technical staff, and lower-level operating staff from serious consideration for a reduction-in-force. This leaves the middle management supervisors and operational generalists or program operators as the moving targets of the budget process. Each time a person like this is cut, it becomes more difficult for program staff to negotiate needed compromises within the organization.

The result is a decline in staff who share a public-sector philosophy of providing service in an equitable manner for the community. Instead, the hard-core technical staff remain and find themselves unable to communicate with other parts of the agency. The greatest challenge from this conflict is that many of the day-to-day decisions on operations are now made at the highest level of the organization, where they may become politicized. They are brokered on the top floor of city hall or among the department heads of the city. The remaining energy and time of the administrative team after these in-house wars provides little opportunity for creative solutions or ideas leading to better public services.

Summary

There is a close relationship between policy making, budgeting, performance management, and program evaluation. Because these involve both political and technical decisions, the HR manager—supervisor, line manager, or personnel specialist—is centrally involved.

Once approved, a policy represents compromises over political and technical issues concerning governmental programs and objectives. A budget is the allocation of resources to agencies to initiate or continue a program. Performance management focuses on how to implement government programs and services as effectively and efficiently as possible. Frequently, the focus is on how to scale back on programs and service levels without damaging the quality of public services unacceptably. Program evaluation is the application of political and economic criteria—developed through techniques such as risk analysis and cost-benefit analysis—to asses an operational program’s efficiency, effectiveness, or political responsiveness.

In the current environment, performance management is likely to occur in public–private partnerships or networked organizations that complicate issues of authority and accountability. One area that continues to attract advocates of administrative efficiency is the privatization of public services. Nevertheless, the hope that the private sector can deliver public services at lower cost is tempered by concerns that employee and client rights will be eroded, that social equity claims will receive less attention, and that accountability mechanisms like open meeting laws and open records requirements will be diminished.

These increased options for performance improvement potentially offer HR managers an expanded role in strategic workforce planning. To actually assume this role, they must be informed and effective members of a team of managers, elected, and appointed officials who understand technical operations and service delivery options and who can apply this knowledge as internal consultants to issues of performance management, program evaluation, and productivity improvement.

Key Terms

applied behavioral science (ABS) 97

audit 88

benchmark 95

budget 87

ceiling budget 87

cost-benefit analysis (CBA) 91

effectiveness 90

efficiency 90

financial management 88

human resource planning (HRP) 85

information and communications technologies (ICTs) 94

management information system (MIS) 86

network (organizations) 95

outcomes 89

outputs 92

performance management 88

performance measures 89

policy making 86

political/social perspective 91

productivity 89

productivity improvement 92

program evaluation 88

public–private partnerships 94

rational/economic perspective 91

responsiveness 90

risk assessment 91

Discussion Questions

1. How do policy making, budgeting, and performance management epitomize the impact of the value of political responsiveness on public personnel management?

2. How are HRP and forecasting in public agencies related to the budgetary process?

3. Define and then describe the relationship among the three alternative definitions of productivity (efficiency, effectiveness, and responsiveness).

4. Describe the elements in a HRMIS and the role such a system plays in an organization’s ability to meet its goals? If you are familiar with such a system, what information does it produce that is helpful to agency managers? What are the drawbacks?

5. What are the pros and cons of contracting out? If you have experience with contracting out, what challenges did you face in writing the contract specifications and what challenges did you face in administering the contract?

6. Describe the HR manager’s enhanced role in seeking productivity improvements.

Case Study #1: A Day in the Life of a City Manager

One year ago, in April, Cityville (population 80,000), a suburban city, hired you, Arlene Mayberry, as the new city manager. You brought a reputation for sound financial management and were chosen unanimously by the council. Cityville has experienced revenue shortfalls in the past two years due to a revenue decline in sales tax. The shortfall resulted in modest increases in the mill levy during these two years. The school board’s mill levy increased substantially a year ago due to a cutback in state aid to school districts. The county’s levy is scheduled to rise modestly for the next three years due to commitments previous commissions have made to a significant capital improvements program.

In April, Save Our City, a group dedicated to holding the line on taxes, surprised everyone, including you, by electing two of its slate of three candidates to the city council. The council now consists of these two members, Robert Pipes and Caroline Nixon, both elected to four-year terms; Jane Scott, a very politically astute middle-of-the-road council member who has two years remaining on her term; Max Laney, an ex-police officer supported by the Fraternal Order of Police, with two years remaining on the council; and Ron Reaume, who ran on a platform expressing concern for rebuilding a sense of community and respect for diversity and was elected to a two-year term. Reaume has already said he will not run for reelection. Scott and Laney have not indicated their plans.

You view this group as very diverse politically and potentially difficult to work with. You expect that a number of issues will be decided on split votes. In the summer following the election, after considerable debate and political maneuvering, the new council accepted the budget you had proposed on a 3–2 vote. The fiscal year runs from January 1 to December 31. None of the council members wanted to raise taxes, and the two-mill increase you reluctantly proposed was reduced to one mill with the two Save Our City council members voting against adoption; they favored no tax increase under anything other than financial exigency.

After adoption, Pipes and Nixon jointly issued a press release calling for tightening the belt, increased productivity, and sacrifices just like those made by private-sector small businesses and ordinary citizens. The newspaper carried a front-page story without editorial comment, even though the publisher is known to be sympathetic to their cause.

After the budget was adopted, during the fall and winter it became obvious that police-community relations were showing signs of strain. A self-appointed task force representing a coalition of culturally diverse groups met and held a number of forums to gather information about how citizens felt the police were treating them. The forums were not well attended, but it was clear from those who did attend that individual members of minority populations in Cityville felt the police had treated them inequitably. For example, one African-American youth said he was walking home from a late-night job carrying a bag of groceries when he was stopped by the police and told to empty the contents of the bag.

In the spring, responding to a 911 family disturbance call, the police shot and killed a young Asian wielding a knife. The police claimed self-defense; the family, speaking little English, was distraught and suggested that the police had acted too quickly and more out of concern for their own safety than for the victim or family.

The event heightened tension in the community, even though the vast majority of Cityville supported the police. The council was aware of this majority, but Reaume in particular believed something ought to be done and urged city staff to make some suggestions. He became an occasional visitor to the meetings of the task force on police-community relations—now heavily attended—and pledged to introduce their anticipated report to the council. Laney defended the police at the next council meeting, noting that police work had become more dangerous in Cityville, and that these events, tragic as they are, happen in today’s violent world.

The next week, Pipes and Nixon declared that it might be worthwhile to look into a possible contract with the sheriff’s department for law enforcement. They contended that the sheriff’s department was larger, had better training, and could provide law enforcement more cheaply than Cityville could on its own. Laney became extremely angry! The leadership of the police union quickly set up appointments with each of the council members. Reaume backtracked a bit, suggesting that rebuilding the sense of community in Cityville required maintaining an independent police force.

As this political maneuvering was going on, the budget process was beginning. The police chief, Jack “Buck” Fishbach, requested a meeting with you. Buck is a no-nonsense law enforcement officer, professionally trained and tolerant of city managers at best. He had been one of the original founders of the Fraternal Order of Police in Cityville when he was just a corporal, years ago. He reminded the city manager that ten years ago the city had passed a half-cent sales tax to hire new police officers. You knew this. The chief added that since that time, in order to show fiscal restraint, the city had not hired a single officer, despite the addition of some 10,000 citizens. This was news to you, and you kicked yourself for not knowing it already. Further, the chief claimed that the police had become exasperated and very angry because lack of staffing had required them to cut back on the very community-oriented activities they were now being criticized for not having performed. He said he was going to develop and present to you a budget proposal designed to augment staff over a five-year period. You knew that the only way to hire more police would be to raise the mill levy.

After the chief leaves, you get a call from the newspaper publisher wanting to know how things are going.

Questions

1. What are you going to tell the publisher?

2. How are you going to approach the budget?

3. How are you going to deal with the chief of police?

4. How are you going to deal with the council?

Case Study #2: Privatization

A majority of the governing body has pledged to the voters that it would explore all avenues available to privatize city services. It has directed the chief administrative officer to present council with some options. After discussion with department heads, the CAO has suggested the following: The city can save some $500,000 annually if it privatizes its sanitation service. This savings could translate into a reduction in the property tax of some 5 percent.

Council member Rodriguez asks how this savings can be achieved and whether the present sanitation workers will lose their jobs. The CAO responds that based on conversations with him, the contractor would hire all of the displaced employees who apply. “However,” she adds, “a large amount of the savings probably would be achieved by reducing employee benefits, including health-care coverage. There will be no pension benefit.”

Council member Johnston indicates that 70 percent of the employees who will have to change jobs are racial minorities. He noted that the skill level of the sanitation workers is such that they will not have any choice but to accept the reduced standard of living.

Council member Reyes acknowledges Johnston’s concern but indicates that the savings will be reflected in a property tax reduction that should benefit the poorest landowners the most than those on fixed incomes in modest homes.

Council member Richardson suggests that the city’s economic development strategy is aimed at developing good-paying jobs. He asks if the privatization of sanitation services will advance that goal for minorities as well as other citizens and taxpayers.

Prior to the evening that the city council will discuss this item, the council members report that a number of taxpayers have called urging privatization and following through on campaign pledges. It appears to the council members that the majority of voters would favor the privatization.

At the evening the item is on the council’s agenda, and the room is packed. On one side are members of a taxpayer’s group in favor of the privatization. On the other side are about half the city’s sanitation employees, and a group of African-American and Hispanic clergy and community activists who are against privatization.

Questions

1. What makes this case so difficult?

2. What expressions of different values can you find?

3. Who should make the decision whether or not to privatize? Defend your choice.

Case Study #3: Between a Rock and a Hard Place

To:	John Nalbandian and Donald Klingner
Fr:	Under-Secretary, State Department of Human Resources
Date:	April 15, 1996
Subj:	Downsizing

The Department of Human Resources administers Workers’ Compensation Insurance, Unemployment Insurance, and a variety of Employment and Training programs. We do it with 150 fewer employees than we did 16 months ago. Real dollar reductions in federal funding have harshly cut into our ability to support our operations. Unlike most other cabinet-level agencies, the Department of Human Resources is 99 percent federal funded or employer-fee funded. Like most state agencies, personnel salaries and benefits are more than 80 percent of our total cost. When the federal budget takes a bite out of our budget, the only recourse is to reduce staffing. That is a polite euphemism for firing real people. It’s a hard thing to do.

In January 1995, the department had 1,079 full-time equivalent positions and about 1,000 people actually on the payroll. The new administration inherited a funding problem that had been building for five years. Shifting personnel and costs between programs and funds had prevented layoffs during that time. The bill came due with the change of administrations. Unemployment insurance funds declined about 10 percent this year. Employment and training funds took a bigger hit. In total, the department received about $6 million less this year than last year. That was a 15 percent decrease. Again, I point out that this was a real dollar decrease, not a typical inside-the-beltway decrease in the increase.

Our programs are on staggered fiscal years, so the budget reality came home in July and then was reinforced with further funding cuts in October. In July, we instituted a hiring freeze to take the most advantage of attrition. About fifty people left the payroll and were not replaced. By October, it was clear that a layoff would occur, and we spent the next three months going through all the hoops and barrels at the division of personnel services in the department of administration. This was a learning experience for us as well. The most senior worker there could not remember when the state had last had a layoff. We were rewriting the book. The “bureaucracy myth” is not always fair, but in this case, it took us until the day of the scheduled layoff announcement before all the process was approved and paperwork cleared. We struggled with holdups, delays, and paper shuffling to no end. Every time we thought we were good-to-go, another person had to bless everything.

We were in constant communication with employees, talking about budgets, revenues, expenses. Layoffs were discussed at length. Positions for abolishment were identified based on the requirement to get the job done. All local offices were run through a staffing formula and nine were identified as too small to function at the soon-to-be reduced staffing levels. Those offices were announced for closing the same day as the layoff letters were mailed and layoff announcements made.

Despite our efforts to be open and clear, many employees were shocked and in disbelief that layoffs actually occurred and that offices were actually locked and shuttered. The culture of governmental/bureaucratic invincibility that has developed over the last thirty years made it impossible for the employees to believe what they were being told. The paradigm of government growth shifted, and they were blinded by their old ways of thinking about government employment.

We established contact teams to assist laid-off workers with unemployment benefits and job placement. The Secretary and I made special contacts on behalf of many workers to gain placement at other state agencies. We wrote many letters of reference. Some laid-off workers were rehired within our department on a temporary basis due to the unexpected arrival of a special grant. All these efforts helped ease the situation.

However, after all the bumping rights were exercised, the layoff affected more than 300 of the 1,000 employees in the department, either through demotion, reduction in pay, or termination. With one third of our department family dysfunctional, performing even daily operations was difficult. It took excessive and redundant planning to ensure that the public still received services during this time. It is a credit to all our public employees that little disruption occurred.

Due to civil service regulations and policies, seniority still rules in our state government. Among the saddest tasks of management is to tell highly skilled, fresh, gung-ho, young public employees and administrators that they will be laid off while older, less effective workers remain. The questions of equity, individual rights, and efficiency cut in many directions.

Now, with Congress locked-up, government shutdown, block-grant proposals, devolution to the states, and election-year posturing, we are preparing for additional cuts and taking steps to plan for future layoffs. It is naive to assume that our department and others are through with downsizing. I think it is only beginning.

Questions

1. The authors raise a number of concerns about the functioning of the agency. After identifying the problems the author states, try and separate them into those which can be addressed (if at all) by (a) elected and appointed officials, (b) managers and supervisors, (c) the personnel director, (d) employees.

2. What are the solutions to those problems that you identified as resolvable in your response to question 1? For each solution, specify the person or group responsible for implementing it, and how you would recommend they work to overcome any implementation barriers.

3. For those problems that are not resolvable under current conditions, specify the changes that would have to occur for the problem to be solved? How bad would things have to get? How would that make the problem resolvable?

4. If you were a manager in this organization, how would you deal with employee anxiety and the performance issues it can create?

Notes

1. Kingdon, J. (2002). Agendas, alternatives, and public policies. New York: Longman.

2. Kingdon, J. (2002). Agendas, alternatives, and public policies (2nd ed.). Longman; and Peters, B. G. (2006). American public policy: Promise and performance (7th ed.). Washington, DC: CQ Press.

3. Gladwell, M. (2002). The tipping point: How little things can make a big difference. New York: Back Bay; and Gladwell, M. (2005). Blink: The power of thinking without thinking. New York: Little, Brown.

4. Moynihan, D., and S. Pandey (2005). Testing how management matters in an era of government by performance management. Journal of Public Administration Research and Theory, 15 (3): 421–439.

5. Walker, D. (2002). Managing for results using strategic human capital management to drive transformational change. [On-line]. Available at: http://eric.ed.gov/ERICWebPortal/custom/portlets/recordDetails/detailmini.jsp?_nfpb;true&_&ERICExtSearch_SearchValue_0;ED46 7532&ERICExtSearch_SearchType_0;no&acc no;ED467532

6. Elling, R., and T. Lyke Thompson (2006). Human resource problems and state management performance across two decades. Review of Public Personnel Administration, 26 (4): 302–334.

7. Mason, J., K. Brainard, L. Langer, P. Young, and A. Ross (2004). Pensions and other retirement costs: A ticking time bomb. Municipal Finance Journal, 25 (1): 47–70.

8. Rainey, H. (2003). Understanding and Managing Public Organizations (3rd ed.). San Francisco, CA: Jossey-Bass.

9. Klingner, D., J. Nalbandian, and B. Romzek (June 2002). Politics, administration and markets: Competing expectations and accountability. American Review of Public Administration, 32 (2): 117–144.

10. Cooper, M. (June 25, 2004). Privatizing the military. The CQ Researcher, 14–24.

11. Halley, A. (1997). Applications of boundary theory to the concept of service integration in the human services. Administration in Social Work 21 (3/4): 145–168.

12. Brudney, J., L. O’Toole, Jr., and H. Rainey (2000). Advancing public management: New developments in theory, methods, and practice. Washington, DC: Georgetown University Press.

13. Kettl, D., and J. Fesler (2005). The politics of the administrative process (3rd ed.). Washington, DC: CQ Press.

14. Milward, H. B. (1996) Symposium of the hollow state: Capacity, control and performance in interorganizational settings. Journal of Public Administration Research and Theory 6 (2): 193–195; Cohen, S. (2001). A strategic frame-work for devolving responsibility and functions from government to the private sector. Public Administration Review 61: 432–440; and Hatry, H. (2007). A challenging performance. Book review of David G. Frederickson and H. George Frederickson (2006). Measuring the Performance of the Hollow State (Washington, DC: Georgetown University Press), Journal of Public Administration Research and Theory, 17: 673–682.

15. Kosar, K. (2006). Privatization and the Federal Government: An Introduction. Washington, DC: Congressional Research Service.

16. O’Looney, J. (1998). Outsourcing state and local government services: Decision making strategies and management methods. Westport, CT: Greenwood; Martin, L. (1999). Contracting for service delivery: Local government choices. Washington, DC: International City County Management Association; and Scott, R. (June 2004). Talking trash with the private sector. Public Management, 12–16.

17. Savas, E. S. (2005). Privatization in the city: Successes, failures, lessons. Washington, DC: CQ Press; Warner, M., and A. Hefetz (2004). Pragmatism over politics: Alternative service delivery in local government, 1992–2002. The Municipal Year Book 2004. Washington, DC: International City/County Management Association, pp. 8–16; and Morgan, D., R. England, and J. Pelissero (2007). Managing Urban America (6th ed.). Washington, DC: CQ Press, p. 205.

18. Johnston, V., and P. Seidenstat (2007). Contracting out government services: Privatization at the millennium. International Journal of Public Administration, 30: 231–247.

19. Fn to Sandy Springs, GA

20. Chandler, T., and P. Feuille (1991). Municipal unions and privatization. Public Administration Review, 51: 15–22; see also, United States General Accounting Office. (March 1997). Privatization: Lessons learned by state and local governments. Washington, DC: United States General Accounting Office. GGD-97–48.

21. Siegel, G. (1999). Where are we on local government service contracting? Public Productivity and Management Review, 22 (3): 365–388.

22. Savas, E. S. (1987). Privatization: The key to better government. Chatham, NJ: Chatham House.

23. Sclar, E. (2000). You don’t always get what you pay for: The economics of privatization. Ithaca, NY: Cornell University Press; Warner, M. with M. Ballard and A. Hefetz (2003). Contracting back in—when privatization fails, in The Municipal Yearbook. Washington, DC: International City County Management Association, Chapter 4, pp. 30–36; and Hefetz, A., and M. Warner (2004). Privatization and its reverse: Explaining the dynamics of the government contracting process. Journal of Public Administration Research and Theory, 14 (2): 171–190.

24. Page, S. (2004). Measuring accountability for results in interagency collaboratives. Public Administration Review, 64 (5): 591–606; and Romzek, B., and J. Johnson (2005). State social services contracting: Exploring the determinants of effective contract accountability. Public Administration Review, 64: 436–449.

25. Peters, B., and D. Savoie (1994). Civil service reform: Misdiagnosing the patient. Public Administration Review, 54 (6): 418–425.

26. Milward, H. B., and K. Provan (April 2000). Governing the hollow state. Journal of Public Administration Research and Theory, 10: 359–377.

27. Chandler and Feuille. Municipal unions and privatization; Walters, J. (November 1995). The Whitman squeeze. Governing Magazine, 8: 22.

28. Wilson, G. (2006). The rise of at-will employment and racial inequality in the public sector. Review of Public Personnel Administration, 26 (2): 178–188.

29. Lindquist, S. A., and S. E. Condrey (2006). Public employment reforms and constitutional Due process. In J. E. Kellough & L. G. Nigro (eds.), Civil service reform in the states: Personnel policies and politics at the subnational level. Albany, NY: State University of New York Press, pp. 95–114.

30. Moffett, S., R. McAdam, and S. Parkinson (2003). Technology and people factors in knowledge management: An empirical analysis. Total Quality Management, 14 (2):

(Klingner 103-104)

Klingner, Donald. Public Personnel Management, 6th Edition. Routledge, 20150717. VitalBook file.

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