Managerial de-redesigning possible solution for the economic competitiveness of the Romanian public sector

Dana Mihaela Murgescu, PhD candidate National School of Political Studies and Public Administration, Bucharest, Romania The global economic crisis, whose starting point was the bankruptcy of Lehman Brothers in the autumn of 2008, has had severe impact on national economies all over the world. Central banks and governments were forced to respond quickly and take actions to stop the downfall of economy and the collapse of their financial systems. The austerity measures adopted by the Romanian Government had very little effect. The rigidity, high degree of bureaucracy and the reactive (instead of pro-active) behavior of the public sector made it impossible to rapidly adapt to the new economic realities. A possible solution for improving the economic competitiveness of the public sector and for shortening the time necessary for its response could be the business-like managerial re-designing of the public administration structures, especially at the local level, through the creation of management/administration centers. At the end of 2008, Romania had an economic growth rate higher than 7% and an alltime low unemployment rate of only 5.8%1. The situation changed dramatically in only 6 months, when the repercussions of the global economic crisis began to be felt. At the end of the first semester of 2009, the economic growth was negative (approx. -8%), compared to the same period of the previous year2. In a chain of events, economic non-performance brought about an increase of the unemployment rate, a decrease in the populations purchasing power, and, hence, of consumption. The stress on the state and local budgets to pay the salaries of persons working in the public sector, together with all pensions and medical benefits became enormous. The Romanian Government reacted to the economic crisis by adopting a series of austerity measures, most of them discussed with the International Monetary Fund (IMF), which agreed to provide Romania with conditioned financial aid. Thus, a restructuring of the public sector was commenced, implying, on the one hand the blocking of new employment in public institutions and, on the other hand, the re-sizing of the public sector, especially of local public administration. The agreement with the IMF establishes a ceiling level of public employment, at 1.24 million people, which means that approximately 70,000 persons will be dismissed from work in this sector3. The budgetary deficit target, initially set for 5.9% was changed to 6.8%, in mutual agreement with the IMF. Also, in an attempt to raise budgetary incomes and to reduce expenditure, the level of the value added tax increased from 19% to 24% and the gross salaries of the public sector employees were cut by 25%4.
1

Europe in Figures Eurostat year book 2010, available at http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/ KS-CD-10-220/EN/KS-CD-10-220-EN.PDF; 2 Idem; 3 Mediafax News Agency, October 10th, 2010, available at http://www.mediafax.ro/social/guvernul-s-a-angajat-sareduca-personalul-din-sectorul-public-cu-70-000-salariati-in-acest-an-6106848; 4 Starting July 1st, 2010; Government Expedite Ordinance no. 58/2010, published in Official Gazette, Part I, no. 431, of June 28th, 2010;

The results of the measures adopted by the Government seem unimpressive. At best, the prognosis for 2011 involves an economic growth of 1.5% and an increase of public sector employees salaries of 10%5. A possible solution to the challenges faced by the public sector could be represented by the managerial re-designing of the public institutions structure, namely by reorganizing them, instead of the classical organizational chart with multiple layers of subordination, into a mobile structure, composed of almost independent management/administration centers. These centers have their own budgets, within the great organization budget, and wide decisional and operational autonomy. The outcomes are correlated with the motivation of the centers employees. Managerial re-designing implies the thorough analysis of all management sub-systems of the organization - methodological, decisional, informational, organizational and human resources and their fundamental changing, in the sense of becoming more clearly defined, more precise in terms of competences and knowledge, in some cases, more structured, and, of course, more pro-active6. Although managerial re-designing was conceived to help diagnose private companies in difficulty and was meant for such companies, in order to provide a way to avoid further loss of business, I believe that the same approach can be used for public institutions or public administration in times of crisis. Even taking into account the classical role of public service provider and the mission of public administration to pursue the public good and the public welfare, without a specific economic target, by using managerial re-designing, the economic performance of such institutions would improve; it will not necessarily mean an increase in the level of incomes, but it will certainly mean a diminishing of losses and expenditure. Out of several possible manners of undergoing managerial re-designing, due to its specific attributes, public administration should choose the one involving the most the reform of the system of objectives, of the organizational structure, of the work processes, of human resources management, and of outcomes7. The attitude the organization has towards its future is reflected by the objectives targeted and by the degree of realism of the strategies and policies that dictate the objectives. Process remodeling will analyze the existing work processes and will design a matrix of activities that, combined, will result in the perfect harmonization between objectives and processes. The next step is represented by the re-designing of the organizational structure, transforming the hierarchical, rigid, former structures, into management/administration centers, thus drastically reducing the number of hierarchical levels and providing more autonomy to the heads of management/administration centers. Finally, managerial re-designing in the public sector requires the improvement of the quality of information and the employment of all forms of e-government. Managerial re-designing would considerably increase the reaction speed of the public sector, would decrease bureaucracy and would provide the perfect framework for innovation, initiative and competitiveness, enhancing, at the same time, the managerial and economic performances of the organization.
5

Romanian Government. Press Office. Press release of October 2nd, 2010, available at http://www.gov.ro/premierulemil-boc-a-primit-astazi-la-palatul-victoria-o-delegatie-a-confederatiei-sindicatelor-democratice-dinromania__l1a110612.html; 6 Verboncu, Ion. University course Post-university studies in European projects Management. Academy of Economic Studies, Bucharest. (2009); 7 Idem.

Bibliography 1. Europe in Figures Eurostat year book 2010; 2. Verboncu, Ion - University course Post-university studies in European projects Management.
Academy of Economic Studies, Bucharest. (2009); 3. Mediafax News Agency website.