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# **Box 4. Transforming organizational culture to support reform in Pakistan**

Created by law in 1998 to implement the Companies Ordinance, the Securities and Exchange Commission of Pakistan (SECP) has been markedly successful—largely thanks to a radical overhaul of organizational culture. In a difficult and unprecedented step, it dismissed (with paid salaries) 80 of the 380 staff it inherited from the old Corporate Law Authority (CLA). That provoked fierce resistance and legal challenges, but most of the 80 have since found other civil service posts. The 300 remaining employees were given a choice: continue as civil servants with their job security assured regardless of performance, or become employees of the SECP. Becoming an employee would approximately double their pay and benefits, but it would also expose them to the risk of being made redundant if not deemed up to the job—and force them to compete for promotions purely on merit. All but one accepted the new terms of employment. The SECP supplemented these staff with 40 international and domestic experts, a group that brought along outside standards of service and integrity and became the driving force behind the cultural change. Unlike the CLA, where cases tended to be referred up a bureaucratic structure, the SECP encouraged employees to take responsibility for making decisions. It emphasized staff training, both in Pakistan and at regulatory bodies in other countries. And it set up a vigilance cell in the chairman’s office to deal with complaints, within a year practically stamping out the staff corruption that had been entrenched in the CLA. Another critical step was the creation of a supervisory policy board to serve as a conduit between the government and the SECP. This proved crucial in overcoming the government’s resistance to relinquishing the powers it had exercised through the CLA.

_<u>Source:</u>_ Khan 2004.

# **_Creating performance targets and incentives_**

Aligning managerial incentives with reform objectives is important. One way to achieve this is by translating these objectives into specific performance targets or indicators which can then be independently monitored (monitoring aspects are discussed in greater detail in the section below). Examples include output measures (e.g. the number of land titles secured), input efficiency ratios (e.g. the number of companies registered per staff in the business registry), softer process measures (e.g. the incidence of employee and investor complaints), and outcome measures (e.g. a reduction in the incidence of workplace fires). In Korea, for example, President Kim Dae Jung’s call for a 50 percent reduction in government red tape proved a useful goal for implementing regulatory reforms.<sup>15</sup> Similar targets were set in Australia, Hungary and the Netherlands, while EU accession requirements provided a clear set of targets for prospective member states in the Central and Eastern European cases.

Performance incentives help attract and retain skills, and foster compliance. Peru’s new land management agency introduced productivity-based promotions to provide incentives for staff, while South Africa’s new Revenue Service established competitive pay scales 15 FIAS case study of Korea, forthcoming, p. 24