The bloated, coddled and entitled public sector and its many belligerent unions are a heavy burden. Striking doctors, teachers, engineers, and railway and port workers enjoy little public sympathy for their causes, often for better pay. In many public sector front offices, the customer is not king. Is this a fair description?
A 2014 Harvard Business Review article by Robert Lavigna outlines the challenges of motivating government employees, focusing on structural inefficiencies common across public sectors. The analysis identifies key issues that limit productivity, constrain resource allocation, and impact fiscal sustainability. These are problems the developed and developing world share, in varying degrees.
Lavigna writes about negative public perceptions of government employees undermining morale and engagement, frequent leadership turnover, driven by political appointments, disrupting continuity and hampering long-term initiatives. The difficulty in measuring public sector achievements, which often involve qualitative outcomes, further complicates performance evaluation and weakens motivation. Lavigna also touches on how an ageing workforce presents additional challenges, requiring strategies to retain experienced employees while integrating younger professionals with modern skills. A lack of technological adaptability exacerbates these issues, he notes. Financial constraints, including limited options for performance-based incentives, necessitate reliance on non-monetary recognition to maintain engagement.
Trade unions can complicate reforms, too. He proposed the need for targeted, context-specific reforms. Improving public sector engagement requires addressing systemic inefficiencies, aligning workforce goals with organizational priorities, and fostering a culture of accountability and purpose.
Despite these challenges, Lavigna highlights an advantage in the intrinsic motivation of many government employees: they are motivated by a desire to serve. And this is the case for many Sri Lankan public servants, without a doubt!
The public sector has been a central focus of policy discussions for its size and inefficiencies. The State of the Economy 2024 report by the Institute of Policy Studies highlights the structural changes needed to address these issues and align the sector with fiscal priorities and national objectives. The IPS analysis – detailed below – identifies significant constraints on resource allocation, productivity, and fiscal sustainability caused by inefficiencies and operational challenges within the public sector.
The public sector workforce in Sri Lanka is considered disproportionately large relative to its output. It contributes to a wage bill that absorbs a significant share of public funds, limiting the government in allocating resources effectively. Rationalizing the workforce is identified as a measure to improve resource use. Reducing redundant positions and focusing on essential service delivery functions would allow the government to redirect funds toward salaries for skilled professionals and operational efficiency. However, this requires addressing systemic issues from recruitment to placement and promotions.
Recruitment practices often fail to align with labour market demands. Regulations and political factors determine hiring rather than the requirements of a changing socio-economic environment. This mismatch has resulted in overstaffing in certain areas and shortages in others. Pension schemes disincentivize mobility between the public and private sectors, contributing to low attrition rates and limiting opportunities to restructure the workforce. Additionally, current public service regulations make it challenging to terminate underperforming employees, restricting flexibility in workforce management.
Placement and transfer systems are similarly inefficient. Urban areas attract a large share of employees, leaving peripheral regions underserved. In sectors such as education, high pupil-teacher ratios in rural areas indicate unequal distribution of resources. Frequent changes in ministerial portfolios disrupt institutional stability, duplicating functions and increasing administrative costs. Between 2010 and 2024, there were nearly 50 changes in ministerial portfolios, creating uncertainty and impacting service delivery.
Seniority often determines promotions in the public sector rather than performance, limiting incentives to be productive and discouraging skilled professionals from pursuing public sector careers. Political interference further undermines the credibility of promotion processes, weakening governance structures. Comparative systems in countries such as Singapore and New Zealand illustrate the benefits of merit-based promotions, which prioritize competence and accountability.
Capacity development programmes in the public sector do not align with the skills needed to address economic and technological challenges. Managing governance in complex scenarios, such as those during the COVID-19 pandemic, requires cross-sectoral expertise and coordinated decision-making. The compartmentalized structure of the public sector limits the implementation of such integrated approaches, reducing overall effectiveness.
Technological advancements are introducing further challenges. The public sector workforce has low levels of digital literacy, which affects the success of initiatives like online revenue licensing and passport issuance. Current salary structures and limited career incentives are unattractive to skilled professionals needed to implement technological reforms. Resistance to change and rigid regulations delay the adoption of more efficient systems.
Demographic changes also require the public sector to adapt. The ageing Sri Lankan population will shift workforce dynamics, with the working-age population expected to decline by 2030. That will necessitate changes in national priorities, including adjustments to healthcare services and infrastructure development. Integrating technology, such as telehealth and urban planning innovations, is expected to play a role in meeting these demands.
Fiscal constraints further underscore the need for reform. Debt obligations require careful management of government expenditures, including the public sector wage bill. Rationalizing the size of the workforce is seen as a way to achieve fiscal balance and free up resources for development goals. Lessons from other countries suggest that downsizing public sector employment can enhance productivity and reduce pressures on public finances. For instance, in 2022, the public sector accounted for 1.39 million employees and a wage bill equivalent to 4% of GDP. A workforce reduction of 30% could provide space for pay increases while reducing the overall wage bill.
Reforms in the public sector face barriers that require targeted interventions. Motivation among employees is a critical factor for implementing change. Incentives in the public sector are often misaligned, relying on external motivators such as rewards and penalties. Research suggests that fostering internal motivators, such as autonomy and purpose, is more effective in achieving long-term behavioural adjustments.
Aligning public sector incentives with performance outcomes is necessary to address inefficiencies. Introducing mechanisms like performance indicators and competition among service providers has been effective in other contexts. However, these reforms must be managed carefully to avoid adverse impacts on workforce morale. Poorly executed rationalization processes can reduce productivity and create dissatisfaction among employees. Planning must be systematic and systemic.
Public sector reforms must balance fiscal constraints with improved governance and service delivery. Streamlining administrative operations, reducing workforce size, and fostering a merit-based culture are essential steps. Addressing these issues requires strategies that focus on sustainable operations and adaptability. Aligning reforms with fiscal objectives and national priorities will be critical for supporting long-term economic goals.
The IPS study highlights the urgent need for public sector reforms in Sri Lanka to address fiscal constraints, inefficiencies, and the misallocation of resources. The public sector workforce, disproportionately large relative to its output, absorbs a significant portion of public funds through wages, limiting investments in critical areas such as health, education, and infrastructure. Rationalization means streamlining redundant positions, aligning recruitment with sectoral demands, and addressing inefficiencies in placement and transfer systems. It must ensure equitable resource distribution, particularly in underserved regions.
Technological advancements offer an opportunity to enhance efficiency, yet low digital literacy among public sector employees hampers progress. Upskilling the workforce and integrating technology into administrative functions, such as online services, can significantly improve service delivery and operational efficiency. These changes are particularly critical as the country faces demographic shifts, including an ageing population, which will alter workforce dynamics and national priorities.
Fiscal constraints underscore the need for a leaner and more productive public sector. However, the IPS cautions that reforms must be systematic and transparent to avoid negative impacts on employee morale and productivity.
Beyond structural adjustments, the study highlights the importance of fostering a culture of accountability and meritocracy. Performance-based incentives, measurable outcomes, and competitive service delivery models can drive efficiency and motivate employees. Reforms must balance fiscal discipline with improved governance and service delivery to ensure the public sector evolves into a driver of growth and resilience.
“Reforms in the public sector that target structural adjustments have a greater influence on raising productivity. Maintaining wage bill savings is advised in countries with high fiscal consolidation needs. When the public sector claims a pay rise amidst serious concerns over productivity enhancements, downsizing is a means of achieving better pay and higher productivity. Therefore, increasing wages would be justifiable only for the right-sized productive employees,” the IPS said.