Thursday, February 22, 2007

Public Service - 36% overstaffed?

It is difficult to form any coherent picture of relative efficiency or appropriate staffing levels within the public service, but perhaps a look into some of the semi-state companies would be a reasonable proxy, given that they share, with the wider public service, the same ultimate owner representing "the public interest" and the same unions representing the staff. Information on these is more readily available, both from published annual accounts and from media analysis of the privatisation prospectus issued in the case of some such as Eircom and Aer Lingus.

Based on the three "case studies" below, it is possible to surmise that the wider Public Service may be overmanned by approximately 36%. This average will cover a variety of outcomes - from functions which are understaffed to those which might be 100% overstaffed, or whose function might even be redundant.

Eircom in 1994 had approx. 13,000 employees and you waited for a couple of years to get a home phone installed. Through very generous early retirement and voluntary redundancy deals, couple with giving 14.9% of the company to the employees via the ESOT (Employee Share Ownership Trust), this number had reduced to 8,000 by the end of 2004 and your home phone would be installed within days of your request being received. That’s a 38% reduction in staff numbers coupled with a massive increase in efficiency.

ESB in 1997 had 11,500 employees which reduced to 8,300 by end 2005, a reduction of 28% in staffing levels without any noticeable reduction in service levels. This was again achieved through very generous early retirement and voluntary redundancy deals, coupled with significant salary increases for employees who remained behind. A recent survey estimated that average ESB salaries were 40% higher than their UK peers, with some power station operatives grossing up to €140k per annum when overtime and shift allowances are factored in. (According to 2005 annual accounts, the average salary across all 8,300 employees was €65k). ESB staff numbers will have reduced even further since 2005, including 400 staff in their retail network of 54 shops which was sold to Halifax.

Aer Lingus in 2002 had approx. 6,500 employees which reduced to approx. 3,500 by end-2006, a massive 46% reduction in staffing levels in a period when it has greatly expanded its European route network and increased the number of passengers carried. Achievement of this reduction was greatly assisted by an industry background where long-established national carriers such as Sabena and Swissair (both much larger than Aer Lingus) went into liquidation and ceased operations, and through the use of generous early retirement and voluntary redundancy deals, coupled with significant salary increases for employees who remained behind and a 14.9% ESOT stake in the airline at the time of privatisation. Unfortunately for Aer Lingus employees, Ryanair’s dawn raid on the stock, acquiring over 25% and launching a takeover bid, has forced Aer Lingus management to revisit the staffing/efficiency cupboard again. This threatens to be a year of industrial unrest in Aer Lingus.

If any or all of these three semi-states are indicative of the manning and efficiency levels being achieved within the public services generally, then we really are wasting billions, perhaps tens of billions, of euros every year. Whatever opportunity existed to use the bench-marking process to achieve changes in structures and work practices, in order to deliver value for money, has been well and truly wasted. Bench-marking has been, as correctly predicted by the INTO’s Senator Joe O’Toole, “a stroll to the ATM”.

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