Top civil servants play an important role in finding cost-cutting measures

28 Aug 19

Top civil servants broadly have two strategies to choose between when deciding on efficiency cutbacks but must bear in mind the values that motivate the decisions, explains Leiden University’s Eduard Schmidt.

 

Governments throughout the world have been hit hard by cutbacks in the last decade. 

The banking crisis, followed by an economic crisis, left governments around the world facing decreasing tax revenues and increasing public debt.

Public Money & Management

While many governments implemented austerity measures on a number of policy domains (such as social welfare and education), they were also forced to cut back spending on their own expenses, that is the costs for running governments’ administrative machine.

In such cases, top civil servants play an important role in finding ways to cut back spending on their organisations. 

The two strategies

When talking about the implementation of cutbacks, the most well-known distinction is between two strategies: proportional and targeted cuts. Proportional cuts, to start with, are cutbacks that are divided in equal measures throughout the organisation. This means that every organisation unit faces (more or less) the same percentage of cutbacks.

Targeted cuts, on the contrary, are used as a strategy to differentiate between organisation units, thus cutting back more in one department, and making less substantial cutbacks (or even no cutbacks at all) in another.

Based on academic literature, we have seen different reasons why top civil servants would opt for one strategy or another. 

Proportional cuts, for example, are said to be motivated by concerns for fairness and equality, as the pain of cutbacks is shared among all organisational members. It is therefore, that such a strategy is sometimes regarded as the equal misery approach.

Often, such strategies are used in the first stages of financial decline, to quickly implement cutbacks and ‘cut back on slack’. The main advantage is that this strategy is relatively easy and quick to implement, as there is no need to make an extensive analysis of where cutbacks can be implemented.

The downside is that it is unclear when cutbacks go beyond slack, and hit organisational performance.


'Top civil servants who value fairness may be more inclined to adopt proportional cutbacks, while top civil servants who hold values such as efficiency high, may be more likely to use a targeted cutback management strategy.'


Targeted cuts are a strategy usually adopted when financial stress continues, which require more difficult decisions, as  top civil servants need to explain why one department is hit more than another, in order to be accountable. One of the advantages of this approach, is that one can differentiate between efficient and inefficient

organisational units, and thus make sure that those organisational units that are already productive, are exempted of cutbacks.

Taking these considerations in mind, it can be expected that values of top civil servants, as these provide direction to behavior, impact what strategy top civil servants adopt.

Top civil servants who value fairness may be more inclined to adopt proportional cutbacks, while top civil servants who hold values such as efficiency high, may be more likely to use a targeted cutback management strategy.

Interviews with 26 top civil servants from the Dutch government, however, shows that the relationship between values and cutback management strategies is not so clear.

The use of proportional cuts is not only motivated by an emphasis on fairness but also by efficiency concerns.

For example, proportional cutbacks can be used to put pressure on the organisation to do “more with less.”

However, efficiency concerns can also lead to targeted cuts, because top civil servants focused on organisational resilience and robustness are more inclined to use this strategy as it is often unclear when proportional cutbacks damage organisational processes and performance.

In short, while the literature may show clear links between values and cutback management strategies, reality is much more fuzzy.

We should be careful with making assumptions on what values underlie cutback management decisions, and that for top civil servants, political actors and citizens alike, it is important to realize and clarify what values motivate decision-making in tough times.

 

  • Eduard Schmidt

    Eduard Schmidt is a PhD candidate at the Institute of Public Administration, Leiden University, the Netherlands. His dissertation concerns the question how top civil servants manage cutbacks targeted at their organisation, using perspectives from change management, leadership and strategic management literature.

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