Performance Management Reforms in the Philippines 413

for the procurement system (RP, 2003). The law simplifies pre-qualification procedures, encourages electronic procurement, and reduces the discretion of public officials on bids and awards. A Government Procurement Policy Board oversees the regulations process.

The Department of Public Works and Highways (DPWH) uses the EPS for determining the eligibility of contractors. The Department of National Defense has developed a system for the procurement of military uniforms and defense hardware. The National Power Corporation uses it for coal procurement. Other agencies use the EPS mostly for the procurement of small supplies and materials.

20.4.3 Human Resource Management

20.4.3.1 Organizing for Performance

When the chair of the CSC first assumed her post in 2004, she diagnosed the state of affairs of the civil service with the help of practitioners, academics, civil society, and career personnel of the CSC in order to define the strategic direction of the CSC. The diagnosis led to the following conclusions about the bureaucracy she “inherited”: a “monster of an organization which is a complex of many substructures with really no single coordinating unit to orchestrate individual functions and overlaps”; the systems and procedures were inefficient because government personnel were “primarily concerned with adherence to rules rather than with attainment of intended results and productivity”; the bureaucracy has not seized the opportunities offered by advances in technology to improve systems and procedures; it is prone to red tape and processes are inflexible; it “subscribes to the old-fashioned top-down approach”; appointments continue to be vulnerable to political patronage; the setting of minimum requirements have helped to professionalize the bureaucracy, but value dimensions such as integrity, character, work ethics, and client-service orientation are not factored in the recruitment process; and that compensation is not adequate to attract and retain the best and the brightest (David, 2004: 4–8). The CSC thus embarked on seven major paradigm shifts (David, 2004: 8–10) (see Table 20.1).

Along the lines of NPM, the CSC launched the “Text CSC” project, which uses text messaging as a mechanism to get instant client feedback. During its first few months in 2002, the project received 4618 text messages that ranged from queries on CSC rules (42%), to complaints about government agencies and personnel (38%), to request for assistance to get documents or receive claims (15%), as well as suggestions (4%). Only 1% of the messages were commendations for good service (David, 2004: 15).

To improve frontline services, the CSC embarked on a project called Public Service Delivery Audit, more popularly referred to by its acronym PASADA (literally meaning on the road). Trained volunteers masquerade as clients to observe the behavior of employees, as well as the systems, procedures, and physical working conditions of frontline services. The CSC recognizes and awards courteous and efficient employees and agencies with systematic, transparent, and client-friendly procedures. On the other hand, it provides training rather than reprimanding discourteous and inefficient employees.

20.4.3.2 Performance Evaluation

Performance management is a process that enables managers to measure employee performance against agency objectives and targets. In the Philippines, it is ironic that while the public perceives civil servants as generally incompetent and inefficient, most employees in government get either a

© 2011 by Taylor and Francis Group, LLC

414 Public Administration in Southeast Asia

Table 20.1 Paradigm Shifts for the Civil Service

Very Satisfactory or Outstanding performance rating. Government agencies were using the New Performance Appraisal System (NPAS), which was founded on the wings of management by objectives (MBO) advocated by management gurus. The challenge was to develop a rating system that accurately and objectively assesses employee performance and to link this with administrative decisions on tenure, promotions, or rewards.

In 2004, the CSC developed the Performance Management System based on the concept of performance contracting that links employee efficiency and productivity with security of tenure. A component of the PMS is the Office Performance Evaluation System (OPES). After piloting it in 2005, the CSC formally rolled out the PMS-OPES throughout the bureaucracy in 2007. The PMS-OPES objectively links performance with office targets, agency goals, and department’s OPIF, and ultimately the MTPDP. It creates a “culture of individual and collective efficiency, productivity, and ultimately, performance-based security of tenure in government” (CSC, 2007). There are still difficulties in defining the major final outputs (e.g., what should be counted), but there are high hopes that the new system will spur productive, efficient, effective, and accountable public service.

20.4.3.3 Rationalizing the Bureaucracy

Wave after wave of reorganization have been concerned with the size of the bureaucracy and the wage bill as a share of the budget. Is there an optimum size for the bureaucracy? A large workforce may be undersized if its size and skills cannot respond to the responsibilities that citizens

© 2011 by Taylor and Francis Group, LLC

Performance Management Reforms in the Philippines 415

expect from it. On the other hand, a very small civil service would suffice for a big population if its quality, mix of skills, and accountability mechanisms are good (Schiavo-Campo, 1997: 35). Rationalizing functions would be the proper way to arrive at the right size of the bureaucracy.

On October 4, 2004, President Arroyo issued Executive Order No. 366, “directing a strategic review of the operations and organizations of the executive branch and providing options and incentives for government employees who may be affected by the rationalization of the functions of the executive branch.” More popularly referred to as the “rationalization plan,” EO 366 called on agency heads to “transform the bureaucracy into an effective and efficient institution for the delivery of core public services” and to “ensure the long-term sustainability of core government services through resource mobilization and cost-effective public expenditure management” (RP, 2004). It called for the scaling down, phasing out, or abolition of functions that do not produce desired outcomes, duplicate or overlap with other programs, compete with the private sector, or have been devolved to LGUs. Personnel affected by the rationalization were given options to be separated from the service or to remain in positions that are co-terminus with the appointing authority. The police, military, public school teachers, and health workers were exempt from the rationalization program.

Government employees perceived the rationalization scheme as a means to reduce the budget deficit by eliminating jobs and an early retirement program. Neither did the unions welcome the scheme. After all, past reorganization efforts resulted in the displacement of employees and did not improve the efficiency of the service. Meanwhile, agencies delayed the submission of their rationalization plans to the DBM. As of this date, there are more agencies that do not have approved rationalization programs than those that have.

The Attrition Act of 2005 passed on January 25, 2005, was intended to improve revenue collection performance of the BIR and the BOC through the creation of rewards and incentives. It links performance to rewards by granting incentives to revenue or collection districts that exceed their targets by 10% for a given period, to be apportioned to the officials and employees according to their contribution to the excess collection. On the other hand, the districts that do not meet their targets are subject to disciplinary measures, including dismissal from the service.

In an era of unemployment and economic crisis, and with the national elections in 2010, the size of the bureaucracy will continue to grow bigger rather than reduce. What matters more is to ensure prompt and efficient delivery of public service, accountable and transparent performance, and achievement of desired development outcomes.

20.4.3.4 Public Sector Compensation

Compensation levels have been deterrents in attracting and retaining competent employees. Furthermore, the principle of equal pay for equal work was not being followed, leading to the demoralization of public servants. Worst of all, low pay can trigger corruption.

There have been three major legislative enactments providing for the standardization of salaries of government workers: Republic Act No. 6758, Salary Standardization Law of 1987 enacted on August 21, 1989, or SSL1 effective July 1, 1989; Joint Resolution No. 01 approved on March 7, 1994, by the Senate and the House, or SSL2 effective January 1, 1994; and the Joint Resolution of the Senate and the House approved on May 8, 2009, or SSL3 effective July 1, 2009.

SSL1 was an implementation of the constitutional mandate to standardize compensation throughout the service to correct existing external and internal inequities. Government salaries were externally inequitable with equivalent jobs in the private sector and internally inequitable because of the many exemptions from the existing scale, especially for offices under the Office

© 2011 by Taylor and Francis Group, LLC

416 Public Administration in Southeast Asia

of the President that paid higher salaries. SSL1 had 33 salary grades with eight steps for each grade. This compressed salary scale discouraged performance because of the narrow bands that overlap at the 4th or 5th step. It hardly had room to reward outstanding performance. The 6th to 8th steps were longevity steps awarded for years of service. This resulted in situations where a subordinate would have a higher salary than a newly appointed superior. The overlaps in the scale encouraged underachievement because the benefits of longevity outweighed the fi nancial gains from promotions that resulted in more responsibility but lower compensation levels (Monsod, 2009:11).

Studies done by the DBM and the CSC have shown that the salaries of Second Level public servants or the professional group were about 30% lower than their private sector counterparts, while it was 70%–80% lower for the Third Level or the executive class. SSL3 significantly reduces the disparities, but salaries for the executive class remain much lower than their equivalent in the private sector. The implementation of SSL3 is spread over 3 years and will be fully implemented by 2012. The current salaries of First Level positions will increase by roughly 12% as these already compare favorably with their private sector counterparts. The salaries of the professional group or Second Level will almost double to approximate the private sector, while salaries for the Third Level will have the biggest increase, but will still be below the level of their private sector counterparts. For instance, the salary of the president of the Philippines by 2012 will only be Php120,000 a month (US$2,500), which is a lot less than what the chief executive officer of a big business corporation receives. Whether the improvement in incentives will eliminate corruption and redound to improvement in the quality of service is yet to be seen.

20.4.3.5 Quality Management Systems

In 2005, the Philippines ranked 77 out of 117 countries in the Global Competitiveness Index (GCI). This improved slightly in 2006 when the Philippines ranked 71 out of 125 countries. In 2007, it ranked 71 out of 131 countries, and again 71 out of 134 in 2008, but it dipped to 87 out of 133 countries in 2009 (World Economic Forum).

To effect actual improvements in public governance, President Arroyo issued Administrative Order 161 on October 5, 2006, to institutionalize quality management systems along the International Organization for Standardization (ISO) 9000 series, which ensures consistency of products and services through quality processes. It directed the DBM’s Organization and Productivity Improvement Bureau (DBM-OPIB), the Department of Trade and Industry’s Bureau of Product Standards (DTI-BPS), and the Development Academy of the Philippines to formulate the necessary institutional structure, mechanisms, and standards to implement the Government Quality Management Program (GQMP). Executive Order No 605, issued on February 23, 2007, directed all departments and agencies of the Executive Branch, including GOCCs, to adopt the ISO 9001:2000 Quality Management Systems with priority to be given to frontline services (RP, 2007). It likewise enjoined SUCs and encouraged LGUs, the judiciary, the legislature, and constitutional offices to pursue certification.

As of the latest count, some 40 national and local government agencies have received ISO 9001 Quality Management Systems certification. Among them are the Bangko Sentral ng Pilipinas (BSP, or the central bank); National Kidney and Transplant Institute; the Bureau of Labor and Employment Statistics and Philippine Overseas Employment Administration of the Department of Labor and Employment; several research and development institutes of the Department of Science and Technology; four bureaus and centers of the Department of Agriculture; the Department of Trade and Industry’s Regions 2 and 12; the Development Academy of the Philippines; the

© 2011 by Taylor and Francis Group, LLC