8.1 Management of Human Resources
8.2 Financial Management
8.3 Administration and Operations
8.1.1 Staff Restructuring Programme
8.1.2 Performance Appraisal System
8.1.3 Internationally Recruited Staff
The management of human resources at IRRI took centre stage in late 1996, with the entire Institute becoming involved in a large Staff Restructuring Programme (SRP). The SRP eliminated 554 Nationally Recruited Staff (NRS) positions from a total of 1,311 positions before. The SRP was planned in late 1996, and the reductions took place in early 1997. The SRP has had short-term costs: financially, in employee morale, and in public relations within the host country.
The process followed is documented in detail in the report 7997 Staff Restructuring Programme (SRP): An Overview. Management and staff at all levels were involved in evaluating the existing organizational structure and planning the new. The intent was to accomplish the reductions by eliminating overlap, increasing cross-training and multi-tasking, and outsourcing of services to local vendors. Management of each organizational area was actively engaged in the restructuring process with assistance from the Human Resources Department and grievance procedures were in place for appeals.
Any management faced with the necessity of large staff reductions must weigh the tradeoffs between rapid execution to avoid prolonged diversion of the organization's focus with a more deliberate approach, where successive layers are pared over several years to arrive at the correct staffing level through an iterative process of successive approximations. Given the anxiety and disruption which would have been caused by a prolonged SRP, the Panel can understand IRRI's choice of speed. However, the Panel believes that it is highly probable that the optimum staffing level was not obtained in every case, and that in some research programmes and divisions the ratio of NRS to IRS has been reduced below optimum, such that scarce IRS scientific talent is not appropriately supported by skilled NRS.
Post-SRP morale problems have been exacerbated by NRS concerns over compensation. A fairly large across-the-board salary increase was given to retained NRS in early 1997, but perceptions vary as to whether this increase was to compensate for increased workload, to catch up with competitive wage pressures, or both. In addition, NRS were promised that job evaluations and competitive salary surveys would be undertaken quickly. This has taken longer than planned, although now an outside consulting firm has been hired and has nearly completed the competitive salary surveys. The Panel applauds Management's recent communication to employees on these issues and endorses IRRI's policy that NRS should have competitively justifiable pay and benefits.
IRRI has well-documented procedures for performance appraisal of both IRS and NRS. However, the newly developed Performance Management System (PMS) for NRS has not been fully implemented. Regrettably, full implementation has slipped once again, and is not scheduled to be completed until the end of 1998. As presently designed, the PMS does not give an easily comparable quantitative measure of performance, leading the Panel to suggest that this should be added to make the system useful in linking pay to performance.
For IRS, especially those in scientific positions working within the research matrix, performance appraisal is of critical importance. If each scientist worked for only one supervisor, performance evaluation responsibilities would be clear and the performance evaluation process simple. In a matrix structure, the complexity of performance evaluation increases substantially, requiring inputs from several project leaders as well as the department head, greatly increasing possible disagreements in evaluation.
Conversations with various scientists led the Panel to conclude that all such difficult problems have not been solved. The Panel suggests that IRRI make this area a priority concern of the new Director of Administration and Human Resources, who should work closely with research management.
The Panel met with project scientists, who comprise a group of about 30 internationally recruited post-doctoral, or equivalent researchers. The Panel learned of some inconsistencies between the contractual benefits, particularly relating to education and health insurance, and the reality once the staff member arrived. This situation was confirmed by management. The Panel suggests that IRRI review the contracts for this group of staff and provide a handbook before arrival, which outlines living and working conditions at IRRI. Moreover, IRRI should provide all new staff with a comprehensive 'starter pack' for orientation.
Turnover figures for the 65 IRS averaged 14% for the last five years, amounting to an average stay of slightly over seven years. This statistic is about what one would expect for a project-based research institute, and does not imply major problems with staff retention. Additionally, a quick review of IRRI IRS salary levels, benefits, and conditions of service showed them in most respects to be in line with or above comparable CGIAR Centres. There are, of course, areas of concern to the staff, but none rises to the level of individual mention in this report.
8.2.1 Financial Management Systems
8.2.2 Revenue and Overhead Recovery
8.2.3 Overall Financial Results
8.2.4 Internal Audit
IRRI's Finance Division is staffed with dedicated personnel possessing a high level of professional qualifications. They are supported in their efforts by modern computerized systems and have responded to the funding changes that require increasingly stringent identification of costs and their containment.
IRRI has developed a project-based financial management system to support the matrix management of its research programmes. A key decision for matrix management is the proper level of detail to be used in capturing the cost data, especially the distribution of scientists' time to projects IRRI does not attempt to do this by using time sheets, instead, allocation to projects is done ex-ante when the budget is prepared. The financial management system then allocates each scientist's time to the projects based on the budget percentages. The Panel believes that IRRI has the cost-benefit ratio of charging time to projects about right and was informed that project leaders and scientists review these allocations periodically and update the allocations as necessary. It would, of course, be unacceptable if the system were mechanically driven to match donor, TAC, or revenue goals, regardless of actual time expenditure.
IRRI is in the process of installing a new financial management system to run on networked PCs. As of January 1998, most of the new system was operational with only two of the old system modules still in operation. The changes to the new system will be almost unnoticeable at first to users since the report formats have not changed. However, the new system enables IRRI to discontinue using the IBM mainframe computer and improve the future flexibility of reporting. The Panel hopes that the reporting flexibility will improve responsiveness to scientists' needs for financial and purchasing information.
Table 8.1 shows the total grant and other revenues for the period. Total revenues have declined from the level achieved in 1993, a year which included large one-time grants for the capital renewal programme. In 1996, restricted funding increased sharply, while unrestricted grants decreased. While Systemwide CGIAR non-agenda funding declined 52% from 1995 to 1996, IRRI's non-agenda funding declined only 11%. IRRI's non-agenda funding in 1996 was 34% of the CGIAR total.
Table 8.1 Revenues
|
|
1993 |
1994 |
1995 |
1996 | |
|
Revenues |
46,993 |
42,128 |
41,716 |
41,231 | |
|
|
Agenda (Unrestricted) |
22,060 |
23,808 |
23,020 |
18,764 |
|
|
Agenda (Restricted |
4,853 |
3,310 |
4,206 |
10,095 |
|
|
Non-agenda (Restricted) |
17,576 |
12,067 |
10,873 |
9,624 |
|
|
Other |
2,504 |
2,943 |
3,617 |
2,748 |
|
Indirect Cost Recovery | |||||
|
|
% Agenda Restricted |
14.1 |
18 |
18 |
7.26 |
|
|
% Non-agenda |
10.2 |
14.2 |
13.5 |
13.6 |
As the proportion of restricted funds increases, it becomes more important to recover indirect costs on those restricted projects. This maximizes the use of unrestricted funds to cover gaps in donor coverage of the agreed research agenda, rather than to pay for the indirect costs of projects funded by restricted funds. It is important that donors, to the maximum extent possible, agree to the charging of indirect costs to restricted grants. From the indirect cost recovery data shown in Table 8.2, it can be seen that the large shift in funds from unrestricted agenda to restricted agenda in 1996 did not carry with it much, if any, indirect cost recovery.
IRRI does an excellent job of minimizing indirect costs by maximizing direct charging. IRRI's General Administration and General Operations expenses were about 20% of total expenditures in 1996, which establishes a rough measure for evaluating the recovery of indirect costs. It can be seen that IRRI is far short of recovering full indirect costs on restricted grants, a situation not unique among centres in the CGIAR System.
To adjust to increasing donor restrictions on funding, it is important that within IRRI (and all other centres) there be no confusion regarding assumed linkages between sources of funding and research priorities. For example, IRRI's highest priority research could well be funded with restricted funds of limited duration.
An EPMR is an opportune time to review the financial history of a centre since the last review. Centre financial reports are usually reviewed annually, using the previous year's result for comparison. However, two points do not reveal a trend, and such trends as may exist can be obscured in the short term by accounting changes, restatements, or the creation or the drawing down of reserves or provisions.
Table 8.2 Selected Financial Data (in US$ 000)
|
From Statement of Activities |
1993 |
1994 |
1995 |
1996 |
|
Net Revenues |
46,993 |
42.128 |
41,716 |
41,231 |
|
Operating Expenses |
47,160 |
42.000 |
42,132 |
46,220 |
|
Surplus (Deficit) |
(167) |
128 |
(416) |
(4,989) |
|
Capital Acquisitions |
9,404 |
2,328 |
4,234 |
2,164 |
|
Depreciation |
1,261 |
1,714 |
2,211 |
2,334 |
The CGIAR adopted depreciation accounting in the early 1990s (codified in the Accounting Policies & Reporting Practices Manual issued by the CGIAR Secretariat in September 1993). This contrasts to the prior practice of including all capital expenditures in operating expenses in the year of acquisition and not depreciating the assets. IRRI has, however, continued to include capital acquisitions purchased with restricted funds in operating expenses. These capital assets are then added to the Fixed Asset Account.
The Balance Sheet is a correct statement of current accounts, but it is not readily apparent, even to a reasonably informed person who reads IRRI's financial statements, where funds in balance sheet accounts originated. Also, while the total equity accounts are unaffected, and certainly no cash is missing due to the accounting treatment, the distributions between the Capital Fund and the Operating Fund may not have been subject to sufficiently well-informed decision-making by the BoT.
To correct this, IRRI should prepare a current analysis of fixed assets, future capital expenditure requirements, and expected depreciation so that IRRI management and the BOT can carefully consider the appropriate level of the Capital Fund. If the fund is higher than needed, the surplus could be moved to the Operating Fund, eliminating the need for its replenishment.
The Panel recommends that IRRI prepare a current Capital Plan, and that IRRI management and the Board of Trustees decide the appropriate level of the Capital Fund, and that all future adjustments to the Operating Fund and Capital Fund be carefully and clearly documented.
While the Internal Audit unit at IRRI has a direct reporting relationship to the Director General and the Audit Committee, it has been ineffective in improving internal controls. Effective internal auditors are perceived by the auditees as desirable collaborators in improving internal controls, not as informants or policemen. Indeed, there is a growing trend toward self-assessment of internal control, in which an organization's managers work with the internal auditor to prepare self-assessments of their own activities. It is clear to the Panel that internal auditing at IRRI has not augmented its effectiveness through collaborative self-assessment.
Internal Audit has shrunk, through turnover and the SRP, to only two auditors from as high as seven, and it is unclear just what path IRRI intends to follow. As internal auditing has evolved, a much broader range of skills is needed. Recognizing this, IRRI is considering the outsourcing of many internal audit functions, with supervision by the current Internal Audit Manager. However, at the time of the review, no budget for such outsourcing had been set, and no concrete plans for integrating such contracted work into a cohesive audit plan were presented.
Internal Audit tasks should be outsourced only if: (i) it is not cost-effective to maintain the skills required within IRRI, and (ii) the Internal Audit Manager has the necessary skills to plan the engagement of outside experts, coordinate their work with the auditees, and follow up on the recommendations made.
The Panel recommends that IRRI ensure that the internal audit function becomes fully effective in improving internal financial and operational controls, by reviewing the current level of skills available within IRRI for the Internal Audit function, deciding which skills it is necessary to have internally and which skills might be outsourced, and implementing the organizational and staffing changes required.
8.3.1 Physical Plant
8.3.2 Transport
8.3.3 Food and Housing Services
8.3.4 Materials Management
8.3.5 Security and Safety
8.3.6 City Office, Mail Room, and Central Files
8.3.7 Conclusion
Administration and Operations as covered here consists of the Physical Plant, Transport Office. Food & Housing Services, Materials Management, Security and Safety Office, and City Office/Mail Room/Central Files. These units have 57% fewer staff positions than at the beginning of 1997. Therefore, for each of these units, 1997 was a year of innovation and restructuring to meet the needs of IRRI with fewer permanent personnel. It is also these units which are in the forefront of learning to meet the ongoing needs at IRRI with persons contracted from outside. Because these units provide a good understanding of the restructuring of activities required by the SRP, we will briefly explain how each unit reached its SRP starring goal.
The Physical Plant is responsible for all the engineering and service needs of IRRI. In addition to maintenance, repair, and fabrication activities. Physical Plant operates the power plant and water system. The staffing level has been reduced from 127 to 46, partly by contracting for many of the activities requiring electricians, painters, carpenters, plumbers, mechanics, and janitors.
Transport consists of the Motor Pool Dispatching Section and the Motor Vehicle Repair Shop. Transport oversees 411 operational vehicles consisting of buses, vans, cars, trucks, motorcycles, and even one ambulance. Staff has been reduced from 65 to 32 by making use of 14 hired drivers, contracting out some vehicle service activities, and improving the efficiency of other activities.
Food and Housing Services is responsible for the operation and management of the food and housing needs of research fellows, scholars, trainees, nationally and internationally recruited staff, visiting scientists, and guests (including EPMR Panels such as this, which unanimously agreed it was exceptionally well cared for by the friendly and efficient employees of this unit). Staffing was reduced from 43 positions to 16. Nineteen of the reductions were achieved by contracting out the Cafeteria operations to a company formed by former employees, the rest from efficiencies in staffing of the other functions.
The materials management functions include purchasing, warehousing, shipping, inventory planning and control, and property disposal. Materials management reduced its staff from 30 to 14, using across-the-board reductions For example, the purchasing department was reduced from 12 to 5 employees by consolidating foreign and domestic purchasing, using the Internet for sourcing and ordering where possible, delegating more petty cash purchases to the divisions/centres/units, using the computerized purchase order system in the new Platinum system, and increasing the use of blanket purchase orders for commonly ordered items.
The Security and Safety office reduced permanent staff from 25 to 16 by increasing cross-training of security personnel for safety positions and increased reliance on the outside contracting of VSIA guards.
There was a marked reduction in the total number of personnel in these units from the former 13, including the Unit Head, to the current 5, excluding the Unit Head, who is concurrently the Legal Counsel. This unit provides a good example of some costs which may not have been saved but merely shifted. With the abolition of the messengers who provided a mail service within the institute, each organizational unit within IRRI must now send its own staff to send or retrieve mail for their respective offices at regular intervals.
The above survey was done with the purpose of informing the reader of the all-pervasive impact of the SRP on a cross section of the Units at IRRI. These are representative of reductions across IRRI, although in percentage terms they are somewhat higher, primarily due to more opportunities for contracting out services. IRRI staff at all levels seem to have responded magnificently to the challenges and are indeed to be commended.
However, such change does not come without costs. The Panel was often told by scientific staff that operational and administrative units including Finance and Human Resources, covered in a different section, were not responsive to the needs of the research personnel for financial reports, personnel matters, maintenance, and purchasing. While the Panel believes that some of these complaints may be short-term problems which are entirely understandable given changes of staffing and organization of these units, managers must be careful now to begin to regain their earlier reputation for good service.
