Government Productivity Dividend
I have been employed in the recruiting industry since 1981 and have
found it to be a very rewarding profession - financially, intellectually and
socially. During 28 years of this period, I earned my living based on a
100% commission plan. This reality provided me with a constant reminder that I
needed to be focused, productive and ultimately successful in staffing the job
openings assigned to me by my clients, or else fail to provide for my family.
As a specialist in the Information Technology and Business
Transformation Consulting sectors, I have learned many useful and interesting
things about people, technology, business, sales, economics and
government. One of my clients during the late 1980s and early 1990s was a
very successful executive named George Sekely.
George was the Executive Vice-President of the Computer & Communications
Division of Canadian Pacific Limited – one of Canada’s largest corporations at
the time. He directed an organization of over 400 IT professionals and he had
built a reputation as one of the best Technology executives in
Canada. George had a formula for fostering increasing productivity within
his organization:
1- Hire the most
talented people you can find for each and every job.
2- Invest in the
best tools and training to enable work to be performed in the most efficient
and effective ways possible.
3- Incent top
performance by providing a framework of clearly-defined goals and rewards to
encourage all staff members and teams to strive persistently to achieve the
desired results.
It was essential that all 3 components of George’s ‘Productivity
Formula’ had to be implemented and supported by C&C’s management team if
increasing productivity was to be expected. Failing to invest in one or more of
these elements would lead to deteriorating performance and unsatisfactory
results.
I have seen this ‘Productivity
Formula’ work very successfully within many private sector organizations.
However, I've never seen it applied successfully in the public sector. There
are many reasons for this failure and anyone familiar with government
operations would be able to identify many of these quite readily. More on this
later.
Call me naive, but it has always been my understanding that the
purpose of government is to provide a limited range of protective services for
the taxpayers who fund its operations and programs. While this was likely the
original intent, it seems to me that the exact opposite has evolved over time -
that all governments now exist ( and continue to expand!) for their own
self-serving reasons. The predictable rhetoric of politicians and
government leaders, of course, claim otherwise - professing public assurances
that the interests of all citizens is all that matters to them. Here’s a
reality check ….with the current crushing levels of public debt standing in
stark contrast to the rich entitlements that have been bestowed on our “public
servants”, is it any wonder that no one believes their claims any more?
What I find most frightening about this scenario is that there no
longer appears to be anything to stop the creeping expansion of the state in
all areas of our lives.
I was raised to believe that I must live within my means. It has
been a matter of personal pride that I have been able to provide for my family
and for my retirement with the knowledge that I will never become a financial
burden to anyone – with one exception - my share of the public debt.
This debt, has been estimated at $122,000 per family, was ostensively incurred
on my behalf even though I never wanted it, never asked for it, and never had
any control over it!
There needs to be a set of “hard checks” on public spending if we
are ever to live within our collective means.
Hard checks are baked into success in all business enterprises. Competition
and the need to be profitable are the two enduring realities that ensure
companies invest thoughtfully in George Sekely’s 3 productivity levers if
they are to survive. These “survival of the fittest” checks and balances
continually guide and mold successful, wealth-creating businesses.
Unfortunately no such unrelenting checks exist in government to determine
success or failure. Oh sure, you often hear politicians and bureaucrats sing the
right words to the appropriate productivity tune, but the measures to control
government excesses are as flimsy and flighty as the whims of the electorate at
election time.
The sad truth is that there exists no incentive for government
leaders and workers to increase productivity or control costs.
Human nature, which is governed heavily by the survival instinct, is
inherently self-serving. This fact is clearly manifested in the poor attitudes
towards work responsibility and work performance of too many government workers
today. To add injury to insult, these same people have manned picket lines to
extract rich entitlements (compensation, employment benefits, job security and
pension schemes) in spite of their dismal productivity records.
Why is this the way things are? Simply put, public servants
have no “skin in the game”.
There is nothing to encourage them to reduce costs and/or to increase
their productive output. On the contrary, the pernicious influence of trade
unionism has actively pursued an ethic of less productivity within their
memberships. With some 750,000 government workers in Ontario working under
union-negotiated employment agreements, this represents collectively an awful
lot of lost human productivity.
Wikipedia defines “productivity“ as: “a measure of the efficiency of
production”; “a ratio of production output to what is required to produce
it (inputs)”; and “total output per one unit of total input”. From
my own studies in economics, I have learned that there are 2 types of
“productivity” - human and capital (aka “return on investment”). If we refer
back to George Sekely’s Productivity Formula, the capital form is derived from
the investments made in tools and training intended to leverage human efforts
for greater gains. However, in government, a positive return on capital
investments is unlikely when it is so difficult to satisfy the other 2
components: ie hire the best talent and provide truly motivating incentives.
Government hiring practices are often designed to meet other objectives that
take precedent over hiring the best talent – meeting “diversity quotas”; giving
preference to “qualifications” over hiring the best person suited to achieving
best results. Once hired, their incomes rise on the basis of “cost of living
adjustments”, tenure, and negotiated collective agreement gains. Promotions are
bestowed on people with “seniority” over people who have produced real
achievements and meaningful results.
As a government stakeholder - a taxpayer - I have been concerned for
many years about the juggernaut we call government and the never-ending lip
service it has paid to attaining productivity gains in its own operations.
Mostly, I am frustrated by my inability to do anything about it. How many
Canadians feel helpless like I do about the current state of Government in
Canada?
I yearn for real levers of accountability that I can employee as a
stakeholder in order to obtain more for the tax dollars that are taken from me
every day and, better yet, achieve a situation where less of my earnings are taken
as taxes.
Government workers that are employed by trade unions have an unfair
advantage over the non-unionized taxpayer. They are, collectively, able to organize
and exercise very powerful levers of political influence to obtain financial
and employment conditions that favor themselves - at the expense of the rest of
us.
Some may argue that all taxpayers have the right to vote for the
government they desire. However, a single vote can in no way be compared as a
lever of political influence when matched to that under control of trade
unions. The balance of power has become overwhelmingly in favor of serving the
needs of government employees at the expense of the stakeholder citizen.
There is an old saying that there are only two things you can count
on in life: death and taxes. I don't believe that the second part of this
saying necessarily has to be true.
I am proposing a rebalancing of the levers of power that will
provide ALL citizens with a governance structure to protect their interests
without taking anything away from the public servant that he or she has not
earned. I call this governance structure the Government Productivity Dividend.
Here's a summary of its main features:
Government
pension contributions will only be made when annual budgets balance. If pension
contributions are missed one year, then an opportunity to regain part of those
losses will be available if the budget is balanced the subsequent year; in such
a case, the pension contribution would be 125% of the amount expected as a
reward for making up for the failure in the prior year. This, of course, will
apply to the pensions of all elected government representatives in all levels
of the public service sector (no exceptions), as well as all union officials.
Government
Revenues (GR) (from all sources) must not exceed a predefined percent of GDP.
To achieve progressive productivity returns over time, Government Revenue
Targets (GRT) will decrease each year so that a combined provincial and federal
Government Revenue rate of 20% of GDP is ultimately achieved and maintained in
perpetuity.
Government
Revenue will be adjusted for government-induced inflation. This adjustment will
reflect the inverse relationship between the GR and changes in the money supply
effected by the Bank of Canada. This measure is intended will discourage
political and government leaders from hatching schemes to manipulate the Government
Productivity Dividend for political or self-serving ends. For example, if the
money supply increases by 1%, then the GRTs must decrease by 1%. Note
that this feature of the Government Productivity Dividend program makes it
impervious to government efforts to “inflate away” public debt.
It is well-known that changes in government operations occur at
glacial speed. There are many ways for politicians and bureaucrats to stall
efforts to implement programs. However, since the levels of public debt at have
reached near crisis levels with no credible signs for correction, then we
cannot afford to delay implementing the Government Productivity Dividend. The
sooner it goes into effect, the sooner we can expect to reap its rewards and
put our fiscal house in order.
I do, however, recognize that the Government Productivity Dividend
should be phased in over a few years. For this reason, I propose the following:
Schedule of
Pension Contribution payments to be made whenever annual budgets fail to
balance:
85% in Year One;
65% in Year Two;
40% in Year Three;
15% in Year Four;
0% thereafter.
The reaction to the Government Productivity Dividend is as
predictable as the sun rising each day. The self-serving union leaders and
membership will howl that the Government Productivity Dividend is an attack on
Canada’s hard working public servants and their families. The appropriate
response is to point out that their defined benefits pension plans is an
exclusive, tax-funded privilege that may have been viable at a different time
in Canada's history. However - times
have changed and government must change as well for the enduring benefit of ALL
hard-working Canadians and their families, not just those within the government
class.
Furthermore, it is appropriate to point out that pension contributions
are not being eliminated but will be earned as a reward for success rather than
bestowed as an entitlement. If all government works and their union reps
pull together to achieve their targets, there is no reason to expect that they
will lose any pension contributions. The onus will be on every public servant
at every level of government to put forth a collective and concerted effort to
earn their Productivity Dividend by using our hard-earned tax dollars wisely!
I believe strongly in the fairness of the proposed Government Productivity
Dividend. It benefits everyone. Even the retired public servant can look
forward to a future in Canada where the likelihood of economic crisis will be
greatly reduced by the powerful fiscal governance effects of the Government
Productivity Dividend.
As a final comment, I believe that the public servant who has a
sincere interest in working for “the public good” will embrace the Government
Productivity Dividend. These workers will come to feel proud to deliver his or her
work efforts within a framework of increasing productivity and fiscal
responsibility. Human capital is a terrible thing to waste and personal
self-esteem is often derived from knowing that the work you are performing
provides real value for the costs (wages, benefits, tools, training, etc)
incurred.
Having been employed in the personnel industry for nearly all of my
adult life, there is one recurring theme that has arisen in conversations with
the tens of thousands of job candidates that I have interviewed: people want
assurance that their work efforts will contribute in a meaningful way.
I also spoke with many people who were employed by government
organizations in “make work” assignments that resulted in little or no
output of enduring value. I feel story for these people. Let’s dedicate our
efforts to them, and make the Government Productivity Dividend a reality as
soon as possible so that we do not unnecessarily squander another man-day of
Canada's national stock of Human Capital.
