One of the first steps in developing a labor program is to estimate the extent of labor restructuring that is needed. The implementing agency must get a clear handle on the work force to determine what if any changes are needed in terms of numbers, skills, and work practices. This usually involves carrying out a systematic staffing assessment that enables the implementing agency to:
There are three tools that the implementing agency can use to carry out the staffing assessment and define the size and scope of labor restructuring:
In practice these are related and often are used together in a comprehensive analysis.
A staff audit is an essential first step in assessing labor issues in the enterprise. Staff audits make an up-to-date analysis of the work force and provide the basis for subsequent benchmarking and work force analyses. They also create the necessary database for analyses of the costs of alternative severance and pension strategies.
Staff audits help to:
Benchmarks are fixed pieces of information that can be used to make comparisons with other similar fixed pieces of information. The process of benchmarking will help identify main problem areas in terms of the competitiveness of staffing levels and labor productivity. Labor benchmarks are used not only as a one-off activity for work force restructuring but also as a tool for continuously monitoring and improving performance and competitiveness (see box 1.5). In practice it is the process of benchmarking that generates most benefits through the challenging of current norms.
Benchmarks provide managers with comparative data on performance and labor productivity. Although like-for-like comparisons are not always easy, there are several sources of information, and benchmark measures can give the implementing agency crude indicators of the scale of overstaffing.
Three tools, all closely related:
- Staff audits
- Benchmarking
- Work force analysis
Up-to-date records of personnel, and the removal of "ghost" workers are immediate benefits of a staff audit.
A "benchmark" is a comparative measure. "Benchmarking" is the process of comparison.
There are three main types of benchmarks:
Each of the three types of benchmarks has its place. In all cases, however, a combination of measurement and process analysis is important for effective benchmarking. Measurement identifies the gap, but the discussion, debate, and working through of changes provides the knowledge about how to close the gap.
Module 3 provides further details on benchmarks specific to each sector, as well as guidelines on where to obtain benchmarking data and the process of carrying out benchmark analysis.
Staff audits and benchmarking are valuable for indicating the size and scope of overall downsizing that is likely to be needed. These tools, however, still only provide part of the information necessary for detailed assessments of downsizing requirements and methods of selection.
Detailed work force analysis is often needed, as illustrated by the case of Brazil Railways in box 1.6. The purpose of such analysis is to identify staffing requirements at the unit or operational level.Work force analysis will help the mangers in the implementing agency and enterprise managers to:
Module 3 provides a set of tools for work force analysis, including analysis and consolidation of staff audit and benchmark data, functional reviews, ratio analyses of staffing data, productivity reviews, age profiling, and supply forecasting.
More fundamental functional reviews are valuable, too, because they challenge the existing organizational structure and norms. They essentially ask some straightforward but difficult questions:
These tools and the process involved in implementing them to carry out a staffing assessment are covered in detail in module 3. The assessment is generally carried out at the enterprise level. Where the quality of data is poor, the process of data collection and analysis can be time consuming. Moreover, the enterprise may lack the skills or resources to undertake staff assessments. In these circumstances the process may require a combination of resources involving enterprise staff and specialized consultants.
Functional reviews can challenge the basic assumptions about the organizational structure of the enterprise.
Work force analysis is a staffing planning activity that is focused on operational units in the context of work force restructuring.
Investment in obtaining good staffing assessments is usually worthwhile. The assessments form part of the overall due diligence exercise in the PPI transaction and provide a tool to help the implementing agency negotiate with workers and unions. More important, they provide an estimate of the size and scope of labor restructuring, which helps identify the level and location of any excess staff and skill deficiencies. Staff assessments, however, should not become an end in themselves, because actual staffing needs will only be known during the PPI process as investors are brought on board. When the broad estimates of labor restructuring needs are known, the implementing agency can move on to strategic issues of timing and sequencing, and choices about which restructuring options to use.
In 1992 the government of Brazil included the federal railway, Rede Ferroviária Federal Sociedade Anônima (RFFSA), in the National Privatization Program. This was the first major privatization of public infrastructure services in Brazil. Implementing the proposed privatization plan required some degree of reduction in RFFSA's labor force. Although RFFSA had already made significant progress in reducing its employee headcount, the company's labor productivity continued to be low. RFFSA had reduced its total staff from about 110,000 in 1975 to about 42,000 in May 1995. This reduction led to a substantial increase in labor productivity, from 250,000 to almost 1 million net ton-kilometers per employee. This level of labor productivity continued to be insufficient, however, not only when compared with similar North American companies but also with recently restructured and privatized railways in Argentina and Chile.
The strategy to deal with this excess labor had to be subtle because there were significant differences in labor productivity across RFFSA's regions and uniform cuts across the board would not make sense. The solution was to come up with new cost reduction plans for each of the six regional areas to be privatized, based on new operational procedures, with redundant activities identified by job categories. This was essentially a very meticulous job that required a detailed study based on international practice. The redundancy estimates were to be conservative because the idea was to avoid second-guessing what the concessionaire would actually need, while avoiding forcing the concessionaire to have to re-recruit "fired" workers, as had been the case in Argentina and the United Kingdom. In addition, the staff remaining at the company at the time of transfer to the private operator had to be adequate to avoid interruptions in service. To ensure this, a detailed analysis was conducted by the regional managers to assess both the staffing needs for each function and the number of excess workers. By the end of this analysis, RFFSA's management had reasonable estimates of the staff reduction needs in each regional area. In May 1995 this process led to an employment reduction target number of 20,000 workers. Between May and September 1995, 1,953 workers voluntarily decided to leave the company so that by the time the first concession was announced in September 1995 the new reduction target number was 18,047.
Source: Estache, de Azevedo, and Sydenstricker 2000.