Staff audits give an up-to-date analysis of the work force and provide the basis for subsequent benchmarking and work force analyses. They also provide the necessary database for accurate estimation of the costs of alternative severance and pensions strategies, and for the eventual disbursement of payments to workers.
A staff audit is an essential first step in assessing labor issues in the enterprise. Staff audits help to:
Up-to-date records of personnel and removal of ghost workers are immediate benefits of a staff audit.
All categories of staff need to be identified.
There may be a big gap between today's skills and competencies and those needed tomorrow.
In some enterprises accurate data will be difficult to obtain.
A staff audit is a fresh review of staffing. It provides up-to-date information on personnel, and typically includes data on:
In some cases data on these financial liabilities will be available for individual employees; in other cases, only at an aggregate level.
The data set described above represents an ideal level of information needed to fully assess the work force, minimize adverse selection, and calculate an individual employee's entitlements in the event of severance. In the first stages of planning, however, data may not be available and the implementing agency may need to obtain some basic minimum figures. Box 3.1 suggests a minimum data set.
In assessing the work force, the minimum information that the implementing agency will need for each employee:
In the very first stages of staffing assessments, or where data are poor, averages or estimates for categories of employees will be needed (e.g. average salaries, estimated pension arrears, years of service for different cadres of staff).
Some well-managed enterprises will have up-todate personnel records and the staff audit will be relatively easy to undertake. In many developing countries, however, adequate information is lacking and substantial effort is needed to build a credible and current personnel database. It will be more difficult when:
Reviewing a sample of the existing records can help the implementing agency determine whether the data are:
If records are poor, the updating of the personnel inventory is a critical and urgent first step. In such cases the staff audit will effectively provide baseline data against which all proposals for work force restructuring will be assessed.
The way that data are collected and staff audits are conducted is important, too. Effective staff audits will be transparent, and considered by workers to have been undertaken fairly. One way to do this is to use uniform and clear procedures. For example, when Middle East Airlines was conducting its staff audit in preparation for privatization, standard evaluation forms and curriculum vitae formats were prepared for each employee (see an example of employee evaluation form). Another example of transparent procedures is the one adopted in Nigeria's civil service census (box 3.2).
Staff are likely to be worried and made anxious by some aspects of the staff audit. Measures to help workers reduce anxiety include:
Standard approaches help improve transparency.
Records of employee performance are an important data source for the staff audit process. Where appraisal or disciplinary records are incomplete, managers are often reluctant to dismiss staff on the basis of nonperformance because of the risk of noncompliance with labor laws or regulations.
A staff audit in a large enterprise can be resource intensive.
Updating personnel records is, in principle, a relatively straightforward task, but it may be quite onerous, time consuming, and demanding of resources if the PPI enterprise has a work force of tens of thousands of people spread across an entire country, often in remote locations. In some countries, implementing agencies might learn from the experiences (both good and bad) of conducting civil service audits. An illustration of one approach to updating personnel records and identifying ghost workers is given in box 3.2.
When the Nigerian government decided to eliminate ghost workers from civil service employment, it set about the task systematically with World Bank assistance. The methodology involved questionnaires, physical headcounts, preparation of comprehensive nominal rolls (staff rosters), scanned photographs, and the use of file numbers to locate the relevant people, compiling actual personnel costs and calculating personnel costs based on headcounts reflected in the nominal roll. A special instructional guide was prepared to elicit relevant data from the field. The guide contained a step-by-step approach required by auditors in eliciting the necessary information. The guide also included the formats of the nominal roll and the records of personnel emoluments.
The staff were required to appear in groups before a panel of auditors. Each person appeared with his or her employment file, which contained or should have contained relevant documents showing that he or she was a bona fide employee. The files were intended to serve as a control, and an effort was made to match the facts in the file with those on the completed questionnaires.
During the interviews staff were questioned about the facts in the file and the questionnaire in order to authenticate the information provided. The interviews were conducted in the open so that other staff members could corroborate the information supplied by the interviewee. Staff were also all required to fill out standard forms giving:
On the day of the physical headcount, which coincided with payday, each staff member was asked to line up and present his or her forms, together with a photograph and employment file. The forms were then checked against the information on file and signed off by the worker's supervisor. Disparities and suspect submissions were noted and the data was transferred to a spreadsheet. In addition, information on pay was entered on to a second spreadsheet, crosschecking the forms with the departmental personnel emolument cards for each staff member.
Source: International Records Management Trust 2001.
Skills assessments help avoid adverse selection.
Even where there is overstaffing, employees are not just a cost but an asset too. Collecting information on their skills and capabilities will help to ensure that the right overall skills mix is available to the post-PPI enterprise and that critical skills are not lost.
Skills assessments extend the scope of the basic staff audit and are particularly valuable in sectors where there is rapid technological change, such as telecommunications. The purpose of a skills assessment is to provide information that will assist the implementing agency in identifying areas of skill shortages and avoiding problems of adverse selection where the best people might leave during the course of work force restructuring.
Skills assessments have three elements:
Front-line operations managers will have a wealth of knowledge on current skills shortages.
Operations managers, responsible for maintenance or service delivery, usually know very well what skills are in short supply today–often much better than top management knows them. Senior management, however, will have a better picture of the overall direction of the enterprise–and hence future skill needs–so the skills audit will need the perspectives of both groups.
Sometimes critical skill surpluses and deficits are not hard to analyze (as in box 3.3). Although some skill issues can be predicted easily, the implementing agency should be cautious in such decisions. In the airline example in box 3.3, for example, it is conceivable that a PPI investor might be interested in those skills to provide a new regional maintenance business for Boeing aircraft. Where new technology is to be encouraged, the existing managers may not know enough about that technology to make the best decisions on future staff restructuring.
Awork force restructuring exercise formed part of the preparation for the privatization of Middle East Airlines in 2000-01. Of a total work force of 3,700, about 1,120 were estimated to be surplus to requirements. The largest group of redundant workers was 700 ground employees trained in servicing Boeing aircraft and not qualified to service Airbus aircraft, which made up all of MEA's new fleet.
Source: Middle East Airlines.
Union involvement can be useful in the case of skills audits. Often unions are aware of the need for reskilling of the work force and may take a lead on pushing for the reskilling of their members as part of work force restructuring. (See, for example, box 3.4.)
Trade unions strongly opposed the corporatization of India's main telecommunications enterprise, BSNL. The unions, however, also worked hard to negotiate on issues of longstanding concern relating to staffing, skills, technology, and the viability of the organization.
It was clear that there was overstaffing. As early as 1982 the Sareen Committee Report on the Telecom Sector had pointed out that in India there were 104 officials per 1,000 telephones as against less than 10 per 1,000 in developed countries. At that time the International Labour Organization played a significant advisory role with respect to preparing for work force restructuring, and the telecommunications trade union federations accepted a ban on recruitment in 1984. This ban preceded the creation of Mahanagar Telephone Nigam Limited and Videsh Sanchar Nigam Limited (two new state-owned firms specializing in supply of telecommunications to Delhi/Mumbai and data services, respectively) a few years later. Together with the vast expansion of the sector, this ban led to an improved staffing ratio of 35 per 1,000 lines by 1997. Although there was a ban on new recruitment, the unions had been successful in obtaining the regularization of 100,000 casual and other workers.
The Sareen Committee had also noted a mismatch between the skills required for new technology operations and those that actually existed. Skill upgrading also constituted a core demand from the Federations. After the announcement of the National Telecom Policy, the trade unions gave strike notices in August 1994 and June 1995. In both those cases there was an expression of concern about the too-early entry of the private sector and the need to upgrade skills within the public sector enterprises to match this competition:
"The trade unions in Telecom have neither opposed its expansion nor modernization, but have repeatedly been urging for upgrading of skills and education of the work force which was recruited in a period for the type of work which does not exist today. We have persistently stressed for bringing about a change in the work culture which cannot be automatically achieved by economic improvement" (Gupta 1998, pp. 33, 34).
Sources: Interviews, relevant reports, and documents; Gupta 1998.
If knowledge might be lost as a result of the PPI process, the implementing agency can encourage today's managers to document and record critical information.
Skills considerations are highly relevant to work force restructuring in PPI because poorly planned labor adjustment that is not skill based can lead to loss of capability within the enterprise, which can affect service delivery and lead to perceptions that PPI has "failed." Even when faced with an urgent and undisputed need for downsizing, the implementing agency will need to recognize that workers are also assets–and that their knowledge and experience may have value. Two examples from the railway sector illustrate the problems that occur when this knowledge is lost:
Chile's Fepasa railway (see box 5.8 in module 5) and the United Kingdom's privatized track infrastructure (box 3.5).
Skills and knowledge can be thought of as the understanding gained from experience. If it is important in a particular PPI scheme, the implementing agency can encourage actions to reduce the loss of skills. The following are some of those actions:
The experience following British Rail (BR) privatization illustrates how flaws in labor restructuring can bring the broader PPI agenda into disrepute. The BR privatization is much cited in Europe as evidence that private profit is incompatible with public safety and service reliability. But testimony given at a public inquiry following three fatal train crashes in the four years after privatization suggested that a principal lesson the experience provides for implementing agencies internationally is to pay adequate attention to issues of work force skills and institutional knowledge.
One former senior British Rail manager, Chris Green, who has since been recruited by one of the train operating companies to help them deal with their problems, told the Financial Times that the "collapse" of professionalism has been the "most fundamental" consequence of privatization. He cited contracting out and the departure of many junior and middle managers "with vital experience" as the cause of the problems. "The net result has been a collective loss of memory on the basics of running a railway," he said. (Financial Times, "Inside Track: A pragmatist's track record," February 14, 2001.)
The Financial Times has vividly drawn attention to the consequences of replacing an integrated work force and an established hierarchy with layer upon layer of contractors and subcontractors to carry out track maintenance more cheaply. "The first consequence was the breakdown of the old comradeship, which used to mean that problems were easily spotted, repairs made, and people could talk to each other," the business newspaper's analysis concluded, adding:
Track workers operated in gangs and knew their stretch of rails like their own back gardens. Instead, workers became nomadic, moving to the next job with little or no local knowledge and instructions not to talk to rival workers except via a supervisor miles away. The second big problem was a growing lack of control over the staff and their work. There have been complaints of sub-contractors recruiting workers out of pubs to fill gaps on the night shift. (Financial Times, "Railtrack descent into chaos," February 22, 2001.)
The overall effect was to break "traditional bonds and practices of passing on skills and experience," the Financial Times commented, and this was exacerbated by the introduction of "hardnosed commercial tensions into relationships that often needed to be co-operative." "Safe working of the network is hardly possible in such a climate," John Hurst, British Rail's former organizational development manager, told the public inquiry into the crashes. "Merely taking steps of a technical and operational nature, in light of any particular disaster, will not address this underlying malaise which will inevitably chronically manifest itself in new disasters." (Financial Times, "Railtrack's rocky train journey to its fifth birthday," May 21, 2001.)