Could restructuring bail out unviable public sector organisations? | Sunday Observer

Could restructuring bail out unviable public sector organisations?

20 November, 2022

The Government has decided to restructure some ill-fated organisations in the public sector. Major criticisms levelled against public and State sector organisations have been focused on their inefficient, lethargic and ineffective performance and as a result, these organisations have become white elephants and maintenance costs of the organisations out of public funds is an unbearable burden to the public of the country. A classic example in this regard is the cost of maintenance of loss-incurred organisations such as the Electricity Board, Petroleum Corporation and SriLankan.

The term efficiency is synonymous with productivity. Productivity is not production. In brief, productivity could be defined as the ratio of output in terms of the ratio of input. What are the inputs applied to achieve a desired output in public sector organisations? Funding for formation of capital, infrastructure facilities, procurement of man power, development of manpower, remuneration package, pension, EPF+ETF and gratuity could be considered major inputs.

Achieving objectives and targets of an organisation and rendering of effective and fruitful service to the public are considered overall output ought to be in public sector organisations and statutory bodies. In reality, the ratio of output seems to be much less when compared to the ratio of inputs in many of these ill-fated organisations. There is a considerable deficiency or gap between the ratio of input and the ratio of output in these organisations. As a result, there is a continuous loss and zero productivity in these organisations.

There are two categories of public sector organisations: viz Ministries and Government Departments as one category and statutory bodies, semi Government Corporations, Boards, Commissions and Authorities as the other category.


The first category of the organisations referred to above are governed by the Cabinet of Ministers and the Public Service Commission. The second category of organisations is governed by Boards of Directors headed by a Chairman. All of them have been appointed by the Ministers in line Ministries in concurrence with the President. There is a possibility that public sector appointments are vulnerable to politicisation. Those appointees are at the discretion of politicians in power, to certain extent.

Politicisation of public sector organisations is the main cause for accumulation of redundant employees in these organisations, due to the fact that politicians who secure Governmental power are in the habit of using statutory bodies to procure employment for their henchmen disregarding recruitment procedures to be followed.

However, this practice is not involved to a certain extent in recruitments through the Public Service Commission. Politicisation is badly involved in non-executive level recruitments in state sector organisations. Most of these political appointees do not have requisite qualifications nor they have any work to do in the organisation, although they are being blessed with a handsome package of remuneration at the cost of public funds.

In this context, these organisations are not in a position to render an effective service to the public on the one hand, nor is the public in a position to sustain the burden of these organisations on the other hand.

Trade unions

Redundant employees of these organisations are inclined to embrace trade unions to safeguard their job security. Having capitalised this situation, trade unions are in the habit of manipulating these employees as a cat’s paw to realise hidden agendas of the political parties, to whom these unions are affiliated. This is what is happening in most of the organisations in the State Sector of the country. These organisations with redundant groups of employees have become strongholds of politicised trade unions.

A restructuring scheme should cover following aspects: viz restructuring of manpower, organisational structure, management, capital formation, investment and restructuring of the compensation (remuneration) system. It must be an overall restructuring process.

Restructuring of manpower is involved in the reduction of redundant manpower which is called retrenchment or correct sizing of manpower of the organisation, which means permanently discharging of an employee or a number of employees whose services will not be needed for the organisation. There is an option to retrenchment called voluntary retirement scheme (VRS) with compensation.

Retrenchment and voluntary retirement scheme are sensitive and complicated mechanisms due to the fact that these schemes could cause severe social instability and unrest if not handle them properly balancing their plus and minus factors professionally.

Plus factors of implementing either scheme properly are as follows. It reduces overall expenditure incurred on maintenance of redundant manpower which would in turn reduce bureaucracy, increase profit, improve cash flow, increase productivity, increase return on investment, enhance competitive advantage, decision making power, customer satisfaction and service capacity.

Minus factors

Minus factors of retrenchment schemes have been predicted on the basis of possible adverse impact it could cause over retrenched employees, their families and society at large. There is a possibility of challenging legality, reasonability and acceptability of these schemes from the perspective of human rights by employees.

If a retrenched employee is the sole bread winner of a down trodden family which is living hand to mouth, what would be the fate of that family? There are hundreds and thousands of families under this category.

It is extremely important to negotiate with employees identified for retrenchment for a reasonable compensation acceptable to them and to give effect to an appropriate scheme approved by the Government enabling them to find out employment either in the public or private sector on a priority basis when vacancies for employment opportunities are filled in those sectors provided that they meet qualifications in the scheme of recruitment of the organisation. However, it may be noted that the percentage of population that would benefit under a retrenchment scheme in the public sector would be much more than the percentage of population which would adversely be affected under the same scheme.

What would be the appropriate methodology to be used to identify redundant employees in those sectors? This could be done through a work load analysis. It is not possible to decide at a glance that there is a large number of redundant employees in an organisation.

A performance evaluation scheme could be a contributory mechanism in this exercise, through which it is possible to identify high, low and sub-standard performers. Although appropriate training scheme is the best solution to convert sub-standard performers to the acceptable level, there could be some employees non-convertible even after application of training. This category is considered as redundant employees.

Work load analysis

Through work load analysis, we can identify the exact number of man hours required to complete a job assigned to an employee or group of employees within a fixed time limit. If there is a surplus number of employees after deducting exact number of employees required from the number of employees available for a particular job, the surplus number is considered redundant.

Retrenchment is only one aspect of the restructuring scheme. Adjustment to the organisational structure to tackle challenges confronted effectively is another important aspect of the restructuring program. Organisational structure refers to the division of manpower as well as pattern of coordination, communication, workflow and formal power that direct organisational activities.

Organisational charts are necessary to ensure effective management, without which individuals do not understand their jobs, what they must do, how they are to do it and with whom they should work.

Managers of different organisational subunits such as departments and divisions do not understand how their work fits into the work of other subunits in the absence of a proper organisational structure. A proper organisational structure will provide individuals and groups with additional information to help them understand how their efforts co-related with the efforts of the others. They can, therefore, devote their full energies to discharge their duties effective avoiding duplication of effort with other individuals and units.

There is a lack of those qualities in most of the organisational structures of the ill-fated organisations in the public sector and statutory bodies. For example, most of the political appointees or positions created at executive as well as non-executive levels in those organisations are not fitted into the organisational structures.

They are there to safeguard the interest of the politicians who caused undue influence to get them appointed.

Organisational structures

Organisational structures of most of the organisations in the public sector and statutory bodies are hierarchical, taller with heavy layers of span of control which has become a protective cover for bureaucracy and a stumbling block which hinders effective team work. This kind of organisational structures should be converted to slim organisational structures to build up teams and effective team work and constructive communication flow.

In restructuring public sector organisations and ill-fated statutory bodies, the application of Public Private Partnership (PPP) concept is considered an effective solution. The PPP strategy would be a contributory factor for capital formation, financing requirements, investment, appropriate technology, better management expertise and professional experience required for converting these loss-incurred organisations into effective and efficient organisations.

This mechanism will be able to prevent adverse consequences of transferring ownership of public assets permanently under privatisation. PPP is not privatisation. It could provide great relief to the Government by sharing the burden of maintenance cost of those loss incurred organisations in the state sector. Implementation of the PPP model will be able to minimise or regulate politicisation of statutory bodies and organisations in the public sector which is considered as the main cause for drifting them into a loss incurred status.

It is necessary to make a suitable device to regulate the destructive interference of politicised trade unions using employees of those organisations as a cat’s paw to sabotage the activities of the organisation to realise personal agendas of the unions. A survey conducted in this regard has revealed that employees who have secured employment in those organisations using undue influence of politicians have inclined to embrace trade unions to consolidate their positions in the organisations.

In that context, a mechanism so devised should be able to secure participation of these unionised employees in the decision making process and team work to convince themselves that their job security depends on peaceful and constructive co-operation extended to the management instead of hostile attitude consequent to misdirection by politicised trade unions.

In the context referred above, a restructuring scheme could be considered as one of the best solutions to bail out ill-fated public sector organisations and to convert them into profitable, efficient and viable enterprises, eliminating unbearable burden caused by these organisations to the public.