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Devesh Kapur & Ananth Padmanabhan: Finding better leaders

India's public sector faces a leadership crisis that will be solved only by more open recruitment

Devesh Kapur & Ananth Padmanabhan 

Devesh Kapur & Ananth Padmanabhan

India's public institutions face major challenges in recruiting, motivating and retaining talent. The problem has been manifest in the core government bureaucracy for years. In 2012, the total authorised strength of the Indian Administrative Service and the Indian Police Service was 10,884, of which more than three thousand were vacant - 28 per cent of the total. In 2011, of the 100,000-odd Group A sanctioned posts of the central government, 15 per cent were vacant. In 2013, the army's officer vacancies were nearly 10,000, while its annual recruitment was about a fifth of that (in 2012). In end-2012, against the sanctioned strength of 924 in the Directorate General of Civil Aviation, 528 posts were vacant - unsurprisingly, India's air safety was downgraded to category II by the United States Federal Aviation Administration earlier this year.

While the problems are significant at the entry level, they are manifestly more acute at the senior level. The absence of lateral entry at senior levels of the bureaucracy and the judiciary, the straitjacket posed by the seniority criterion and, of course, the "malleability" criterion imposed by the bureaucracy's political masters have extracted a heavy price. As domain knowledge in a host of tasks becomes more specialised, the stranglehold of the generalist becomes increasingly self-limiting.

If these problems are rooted in the history of India's civil services, an opportunity to address these issues in the dozens of new regulatory institutions and tribunals that have opened shop in the last decade has been stymied, even as a self-dealing bureaucracy and judiciary have effectively reserved cushy post-retirement jobs. A simple law that makes sure that the retirement age for the bureaucracy, judiciary and regulators is identical would ensure that they have to make choices earlier in their careers rather than having their cake and eating it too. A target (but not a quota) of external recruitment of a tenth of senior positions in the bureaucracy and the judiciary would at least bring in some fresh ideas.

An equally important, but much neglected, challenge is recruiting talent at senior levels of public sector undertakings (PSUs) and public organisations such as state universities. Any process of recruitment to a particular office acts as the how (the channel of transmission) between the what (the job requirements) and the who (the person fit for it). If too much emphasis is placed on the how, or too heavy formalism on the who, the what suffers in the bargain. And that sadly seems to be the Indian public sector experience.

A recent example of the subordination of the purpose to the process is the Bombay High Court verdict in 2013, in Sonali Pramod vs Central Bank of India. When confronted with a legal challenge to the campus recruitment conducted by the bank to fill officer vacancies, the high court took an extremely rigid stance to annul the recruitment. The judicial reasoning was that public sector banks had to follow the regular process of appointments when regular vacancies arose. This rule, laid down by the Supreme Court when it was earlier dealing with the appointment of temporary, daily wage workers, would equally apply to public sector bank employees, who are mandated to carry out tasks that require much higher skill and expertise. As a result, the talented graduates from the top business schools are hired by private sector banks, while nationalised banks end up with those who go through the rigmarole of the "regular process".

When locking public sector banks into a sticky model of recruitment, the high court could have learnt from the Securities and Exchange Board of India's (Sebi's) recruitment strategy. In 2006, M Damodaran, then Sebi chief, reached out to the National Law School to recruit well-trained lawyers. In eight years, Sebi has become a vigilant regulatory body partly because of the dynamism infused by its recruitment process. Indeed, many such appointees look at Sebi not as a lifetime employer but as a springboard; their departure results in the infusion of more youth and energy at regular intervals.

The inflexible approach to appointments has also led to unintended consequences. The executive, constrained by the requirement of stringent adherence to the rules, often tries not to recruit on a permanent basis. Temporary appointments are made citing "emergency" grounds. When these temporary employees are sought to be regularised, there is extensive litigation on the permissibility of such regularisation. It would be sensible to make appointment norms more flexible and focus on finding the right person for the right job.

A dominant reason for these absurdities in the realm of recruitments to public service is the sword of Damocles of fundamental rights review. The Constitution stipulates that any "authority" that qualifies as "State" is bound to comply with the right to equality. The 1970s and the 1980s witnessed the expansion of the public sector, as a result of which unfettered powers were vested in government-run industry monopolies. This compelled the Supreme Court to take the view that any organisation, regardless of its legal form, would qualify as "state", provided the government exercised "financial, functional and administrative" control over the organisation.

The most important of these, perhaps due to its easily quantifiable character, is the extent of financial control. This has influenced the court to take the view that if a body were to be financed entirely by the government, it would have to follow policies identical to those applicable to a government department.

For PSUs, where the government's role - even when it is a majority or an exclusive shareholder - should be dictated by financial and business concerns, a more flexible application of recruitment and salary norms is essential. The current system of filling senior position vacancies in PSUs through the Public Enterprises Selection Board (PESB) is a time-consuming and extremely rigid process. In December 2013, 32 central public sector enterprises were headless. The PESB's official website reveals 51 important senior-level vacancies that remain unfilled in PSUs, including BSNL, IOCL and Hindustan Shipyard. The story of public sector banks is even more alarming, according to a McKinsey report. The seven per cent vacancy in senior manager positions and 21 per cent vacancy in general manager/executive vice-president positions in 2013-14 are poised to rise to 30 per cent and 87 per cent, respectively, by 2016-17. The Reserve Bank of India has recommended that the government dissociate itself from the selection process involved in picking the heads of state-run banks and that senior executives be selected from a wider pool that includes private sector candidates.

There are several reasons for the protracted vacancies: the absence of a timely succession plan; the imposition of extremely rigid seniority rules that prevent effective lateral infusion of talent; the time taken in obtaining vigilance clearance or approval of a competent authority, court cases and slothful decision making by the administrative ministries concerned.

Perhaps, most of all, whether it is universities, PSUs or public sector banks, the selection and succession plans should be the prerogative of the boards of such institutions, which in any case are chosen by the government. According to a recent report, in order to fill the positions of CEOs of public sector banks, the government selection committee interviewed 18 executive directors for nine posts that would fall vacant in 2013 - in many cases, it spent only 10 minutes on the interview.

The role of the ministries should be policymaking, not filling executive positions in PSUs. But the bureaucracy and ministers want to retain their discretionary control - power, after all, is a means to an end, and sometimes the end itself. The result has been both poor policies and a further weakening of PSUs.

Devesh Kapur is director of the Centre for the Advanced Study of India at the University of Pennsylvania. Ananth Padmanabhan is an LLM student at the University of Pennsylvania Law School

First Published: Fri, March 28 2014. 21:49 IST