LONG IS THE JOURNEY n. 2 Fall 2015

Principles of “good management” in the public sector by Paolo Di Nola (2014)

Paolo di Nola is an executive in a public firm, an enterprise organized in the manner of a commercial company. His ten principles of good management are the product of his professional experience and his approach to conceiving of and experiencing public administration with a passion for change. Each of these principles is articulated with a “for” and an “against,” and teaches us how to combat the corporatism that manifests itself in specific situations, countering it with innovative solutions.
This text was prepared for the “Dossier on Public Administration” (MEGLIO, May 2014, www.effeddi.it ). In a subsequent interview (September 2015), Paolo di Nola illustrated some of the ten principles with examples and further reflections ( www.effeddi.it  ).
The improvement of the status quo of the public administration (PA) can be achieved by applying the principles of “good management.” These are “private sector rules” that are relevant also in the public sector: the two spheres must undoubtedly learn from each other. Listed below are a series of these principles as they have been experienced in a professional capacity, within a public organization that strives to practice (though not always successfully and with much remaining to be done) the simple rules of proper administration.


Return on costs: against inefficiency

A cost must generate revenue: this is the basic principle for any organization engaged in economic activity. This revenue generates either strictly economic profits or improved well-being for the community. Understanding the returns on costs is an essential method of improving management. It exposes the weaknesses of the organization and its activities. This is not merely an accounting concern but a cultural approach to work. Defining the cost of one hour of work motivates everyone to reflect on the value produced in this hour of work.
The understanding of cost structure emerges from an analysis of the returns generated by a cost in the form of results/revenues: specifying the relationship between direct costs (incurred in the production of a goods/services) and indirect costs (those necessary for the maintenance and functioning of the organization, regardless of production) facilitates major organizational changes. 


Organization of Production: against overstaffing

The PA, in the imagination of Italians, is a sort of large “body of staff” of the country. Namely, an organization that does not produce but assists others engaged in production. In companies, especially during difficult periods, staff personnel are seen as energy-consuming entities that are failing to contribute (except very indirectly) to the profits and health of the organization. If they are also perceived to be too numerous, their reputation and justifiability collapses. Their cost is considered to be entirely unproductive and supported by the work of production personnel. It is common knowledge that the unproductivity of the PA is sustained by the rest of the country and by the very few within the administration who also do the work of their colleagues. Knowing the ratio between “staff” (indispensable functions that cannot be eliminated but must be rationalized) and “line workers” is an analytical exercise essential for reorganizing the general structure of the organization along productive lines: the maximum ratio between the two components must be 20:80.


Resource saturation: against underutilization

This does not mean “exploitation,” but rather enabling workers to achieve much more. Work schedules are not sufficient and are often not reliable. With all due respect to the rights of workers, a schedule indicating a full workload does not rule out the availability of time and energy to devote to other tasks. Often, this schedule has been drawn up with excessive caution and there is generally room to do more. It is possible to easily find reservoirs of “energy” that are at least 30%–40% unused. While it may be difficult to capitalize on these “treasure troves,” it is necessary to at least attempt this and insist on it.


Performance management and evaluation: against a lack of self-knowledge

The three issues described above (return on costs, organization of production and resource saturation) can be addressed by understanding initial conditions and the effects they generate. The adoption of credible performance management systems (especially in the PA, where “economic intangibility” becomes a screen that hinders a real understanding of outcomes) and the evaluation of results, effects and impacts are the basic instruments for concretely undertaking restructuring and reorganization. However, it is necessary to prioritize the identification and definition of simple, easily measurable parameters that are not so sophisticated as to heavily burden structures that are already weak.


Limiting outsourcing to consultants: against the loss of self-esteem

There are various ways to undertake the difficult process of reform. One of the most convenient is outsourcing the function of “diagnosis and treatment.” The engagement of consulting firms is a practice adopted by all governments occupied with the reform of the PA. Without dismissing their value, it is nevertheless true that their usefulness depends directly on the nature of the problem and therefore on the technical expertise needed to resolve it. 
The general analyses and its consequent solutions have to be implemented by the very same structure in need of reform. It is unlikely that given the objectives and methodology, there is no internal capacity to carry out analyses. Entrusting this to third parties which, to economize operations, tend not to identify with the structure almost always creates products that are unusable because they are insipid and exogenous. The structure rejects them even if they are founded on valid technical principles.


Continuous change: against the blockage of energy

Creating an efficient structure does not mean that the task of reform has been accomplished. Organizations must be reshuffled to keep them dynamic. This invests individuals with a sense of autonomy and independence in the development of their careers. Individuals who are continually associated with new colleagues and new organizations must frequently evaluate and demonstrate their skills in new environments. Organizational stagnation induces operational lethargy and facilitates the underutilization of resources.
Frequent organizational change can, despite operational disturbances, generate revitalizing effects by:

  1. breaking down internal hierarchies and lobbies
  2. discouraging negative external relationships (individuals who do not remain too long in the same post will not be able to “favor” friends and acquaintances)
  3. re-establishing professional standards (as in the case of flight crews that are replaced for every flight)

While it is not necessary to always change the cards (although extreme situations obviously require it), it is certainly essential to shuffle the deck.


Aiming higher: against a poverty of ambition

The weak condition of the PA perpetuates a phenomenon of deteriorating performance and “production” wherein the less one does, the less one is required to do, because:

  1. technical abilities are weakened
  2. the wealth of experience that can be drawn on for growth is reduced
  3. the administration limits itself, in the best scenario, to goals that are within its reach and does not harbor ambitious aspirations.

The inability to spend EU funds, as evident from the results of recent programming cycles, is also the outcome of a chronic deficit in ambition: mundane tasks substitute structural interventions (which would also enable expenditure), thereby aggravating the general state of affairs. If certain issues are not addressed through structural measures, they are exacerbated over time and become so intense that all solutions appear trivial and insufficient (in cases such as that of Pompeii, of the restoration of certain polluted sites, in disaster prevention, or in hospital management). It is necessary to nurture courage of ambition in the PA, supporting it even on a legislative level.


Affirming team reputations: against the denial of distinctions and the suffocation of pride

This means encouraging offices and administrations to compete with each other to achieve results, with a concrete system for recognizing accomplishments. Creating distinctive identities for teams and offices is extremely useful. The feeling of being part of an inefficient body does not always defeat the goal of becoming more capable, more efficient and higher-performing. Yet, the fear of being “equated with the worst” inhibits progress; the conviction that “my ministry is a disaster” thwarts the possibility of proving that, on the contrary, it is possible to perform better even within it and while being part of it.
The recognition (even without rewards) of the abilities of a particular team, an office, a department, etc. can spread fairly quickly. It becomes evident that certain individuals are better than others and can be relied on to achieve objectives, even ones that are out of the ordinary!
External reputation generates concrete effects if it translates into the rise of team spirit, of a strong identity and self-confidence. Belief in one’s own abilities can overcome even the general despondency created by difficult administrative situations. But at a certain point, tangible rewards must be offered: the delay or absence of concrete rewards neutralizes the reformative power of the enthusiasm and pride that still exist within the PA.


Knowing how to buy, negotiate and manage purchases: against the aversion to the market

The administration’s capacity to accurately identify its operative limits (where high-level technical expertise is not internally available) aids in understanding the need for integration through a rational recourse to the market. If it is truly necessary, those skills which the administration lacks can be acquired through the market. Procurement (comprising the entire purchasing cycle, including identification of needs, formulation of a market demand, use of correct tendering procedures, selection of suppliers, drafting of contracts, quality control of the acquired products, etc.) is one of the essential functions of the administration and ought to be significantly strengthened. Lack of competence in this regard leads to wastages (when procurement is abused, sloppy or incorrect), while purchasing ability dictates the effective composition of technical expertise needed to prepare for and execute the tasks of the PA.
Knowing how to purchase well also implies reducing the “fear” of the market and accords importance to the internal work of the PA. This requires a radical transformation of traditional purchasing methods (through the introduction of e-procurement platforms, central procurement bodies, quality assessment of the products received, contractual modifications to safeguard the PA, etc.)


Result-based remuneration: against automatism

In addition to previous discussions regarding the cap on public sector salaries, it is essential to emphasize performance-based remuneration—in its genuine form, not one that is constructed using excessively easy or already-achieved objectives. A variable component of salary must be offered even to non-managerial staff; this can be constituted from funds saved by eliminating unnecessary expenses. This bonus will be available only to those who intend to assume specific responsibilities (coherent with the duties associated with their particular level).
This mechanism triggers a doubly advantageous process. On one hand, it promotes the rationalization of expenditure, and on the other, it incentivizes productivity and anchors it to simple, clear, measureable targets that are always raised, according to the abovementioned principle of continuous ambition. Every year, while defining the objectives for this variable component, this ambition ought to grow. This process must never cease.