Speech Kallas: "De EU en de VN - versterking van de banden, werk maken van bestuurlijke vernieuwing" (en) - Hoofdinhoud

SPEECH/06/317

Siim Kallas

Vice-President of the European Commission responsible for Administrative Affairs, Audit and Anti-Fraud

The European Union Studies Center, CUNY

New York, 17 May 2006

There are obvious differences in the geographical extent and range of policies covered by the United Nations and the European Union. But in historical and organisational terms, there are many important parallels between them.

Both were born in the aftermath of the Second World War - the UN in 1945 and the European Coal and Steel Community, the forerunner of the modern EU, in 1951. Both have expanded enormously since then - the UN from 51 to 191 member states and the EU from 6 to 25, soon 27. The range of activities of each Institution has seen similarly radical growth. Each institution has faced the challenge of how to agree and deliver effective policies in spite of the very different political expectations, cultural and administrative traditions of their Member States and staff.

However, the administrative and governance structures created in the 1940s and 50s were not adapted to deal with the increased complexity expansion generated - nor with the expectations of the 21st Century. While there were attempts to deal with these issues in the past, they were piecemeal and made limited progress faced with bureaucratic inertial.

Both institutions have achieved much over the years - including in the case of the Commission the creation of a single currency, functioning single market and border-free travel in most of Europe. But both have been badly affected by scandal more recently - the EU by a series of problems in programme management, culminating in 1999 in the events surrounding Commissioner Cresson, leading to the resignation of the entire Commission. And the UN has had oil-for-food and sexual exploitation by peace keepers. These scandals have been perceived - no doubt in part correctly - as a consequence of sclerotic, backward bureaucracies. I, and most people working closely with the Commission, know that the vast majority of staff are very hard working, honest and committed - and I am sure the same is true of the UN. But the perception of outsiders has been too often of inefficiency and systemic corruption. The result for both institutions has been a loss of confidence by key stakeholders, and of moral by staff.

It is against this background that both the Commission and UN have committed to far reaching reforms of internal management and governance. My purpose this evening is to explain what we have done in the Commission and the challenges we have faced, and to stimulate a debate on the parallels between our experience and the difficulties the UN now faces.

Before explaining what we have done in the EU, I should first explain the organisational differences between the EU and UN. In the EU, unlike UN, the internal organisation of the European Commission operates with very considerable autonomy from the Member States, both organisationally and as regards policy development. This is because it was always intended to be the Union's executive body, and is thus headed by senior politicians. We are appointed collectively and subject to approval by the European Parliament; with one per Member State. Most importantly, the Treaty imposes a clear obligation requiring us not to accept instructions from anyone, including of course our Member State of origin: Member States are bound not to seek to influence Commissioners.

Our obligations under the Treaty are underpinned by the Oath of Office we swear on taking up our positions, and the detailed Code of Conduct for commissioners, which includes rules on taking other positions after leaving the Commission.

Failure to comply with these obligations can be brought before the European Court, resulting in possible dismissal and loss of pension - no idle threat, since the Advocate General of the Court has recently recommended that Ms Cresson's pension be reduced by half.

Thus while we obviously bring with us an awareness of national issues and sensitivities, we are committed to seeking to develop policies in the collective interests of Europe as a whole, and genuinely free to do so.

European federalists sometimes view the Commission as the proto-European government. But this is unrealistic - each Commissioner may be committed to Europe, but we come from all sides of the political spectrum. Further, while much of the Commission's power comes from its right of initiative, the decision to adopt major legislative initiatives remains with the Member States and the European Parliament. The Commission can try to cajole and shame Member States into action - and we have the advantage over the UN that much can be adopted by qualified majority rather than consensus. But where sufficient Member States have lost faith in the ability of the Commission to deliver, we cannot force them to act.

The Commission structure has however meant that we have been able largely to separate internal management reform from the wider issues of political control over the organisation - many decisions could be taken by the Commission acting autonomously, and even many of those requiring approval by the Member States (essentially changes to the basic staff rules) could be approved by qualified majority - though the basic Financial rules did require the unanimous agreement of Member States. Where the Member States were involved however, some were reluctant to accept changes in the Commission's internal systems which conflicted with the approach used in their home civil services, complaining that the reform was too "Anglo-Saxon" or "Nordic". Late in the negotiations, national issues intervened, when some Member States tried to reduce the cost of Commission administration to set an example for their internal reforms.

What then, was the objective of our reform?

Essentially, the objective was to rebuild trust after the scandal and damning verdict that there was nobody within the house who would take responsibility for the irregularities that had happened. Reform was a necessity and it required modernising the administration, to make the Commission fit for the 21st Century, by ensuring that we had in place the planning, financial control and governance structures to deliver policy and programme management rapidly and coherently. We also needed to put in place modern human resource management, to get the best from our staff.

From the outset, it was clear that reform had to have clear objectives, and be led from and seen to be supported by the highest levels in the organisation. Planning of reform began in 1999, aimed at delivering three essential elements:

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  Improved financial management
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  A new strategic planning - to make better use of limited resources
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  A new personnel policy.

To ensure that these were rapidly implemented, a detailed programme for Reform, including a comprehensive Action Plan and timetable was devised - and reform was led by a special task force, led by Claude Chene, who is with me today.

By late 2004, when I took over responsibility for the administration, audit and anti-fraud portfolio, we were able to conclude that virtually all measures foreseen in the original white paper had been implemented. But I should say that achieving this required long and intensive negotiations with the Commission's staff Unions and, as mentioned above, with our Member States. It had been generally agreed that reform would only work with the active support of staff, and thus extensive efforts were made to reach agreement with at least the more moderate Unions. Inevitably in the process, some of the clarity of the original reform objectives was lost, but nonetheless a great deal was achieved.

Let me look in a bit more detail at each of the key elements of our reform:

First, the financial management and control system was radically modernised so that responsibilities are now clearly and specifically assigned to the relevant individuals (decentralised); the Annual Activity Reports and Declarations from all the Directors General provide the most thorough and transparent management reporting system of any administration in the EU; a new Financial Regulation enabled rapid transition to modern accrual accounting in 2005 - a quicker change than that made anywhere else.

We created a new Internal Audit Service IAS, and abolished the old system of the central ex ante financial control. The idea was to monitor the system rather than the transactions, and to give real responsibility to those responsible for spending the money.

The new system added transparency for procurement and award of subsidies, separation of function ( checks and balances).

It was accompanied by a major training effort to ensure its smooth introduction.

The second major theme of Reform was Strategic Planning and Programming. This essential component of Reform enables the Commission to show how resources are matched - (or in some cases not matched) to tasks with much greater precision; and it allows Commission, Council and Parliament to make informed choices between priorities for the use of our limited resources.

This process was vital to address what had been a re-current theme in EU affairs: Member States or the European Parliament asked the Commission to act in some new, currently topical area. Always keen to increase its areas of competence, the Commission agreed. Then, finding it had inadequate resources, either the policy was not delivered - or worse, complex structures outside the proper control of the Commission were created to try to stretch the available resources further than they would go. Inevitably these then sometimes failed.

The new system has provided the discipline needed to move beyond the annual budgeting exercise with the Parliament and Member States, allowing us to develop effective multi-annual programming, and to screen Commission activities and identify where resources were underused and could thus be redeployed more productively to other areas. We have much more work to do in this area. But I consider it perhaps the most vital area for restoring faith in multi-lateral institutions. We must be able to cost, plan and deliver policies and operations on time and on budget - or admit to negative priorities and refuse to do them if we cannot commit the skills or resources required to do them successfully. Only then will all Member States be content to give us the necessary money and powers.

In the third theme of Reform, modernisation of personnel policy, fundamental changes to the staff structure were introduced. The philosophy underlying these was as simple. For many people, and for much of its history, the European "project" has been seen as an exciting and forward looking task to be part of. Thus we have been lucky in being able to attract many very high calibre staff. But that had allowed the organisation to become rather lazy about staff development and motivation: many staff were not being enabled to fulfil their potential and often became very frustrated as a result. Equally however, our experience shows that the cultural and organisational complexity of the Commission makes it difficult to join mid career - so it is vital we fully use our existing staff.

The reform aimed to address these issues through a new individual personnel appraisal system merit-driven promotion system and more linear Career Structure, breaking down the barriers between secretaries, assistants and professional staff. Other measures included a major increase in staff and management training, and the strengthening of the disciplinary system. The parallels between Commission and UN reform here are very close.

Reform also introduced compulsory 5 yearly job changes - rotation - for senior managers, and indeed for all staff with financial responsibilities. The objective was to achieve a balance between experience and bringing new ideas into an area - and also to prevent relations between staff and contractors becoming too close. In the past, some senior management positions were seen - informally - as "flagged" for particular Member States: we have moved to a system where merit is always the determining factor for senior management appointments. So there are now opportunities for the best staff of all nationalities to reach the top in all fields. Of course achieving reasonable geographic balance remains vital - and will never be straightforward in an international organisation. But we are more likely to achieve this if our system ensures a strong pool of staff from all Member States. As part of reform, we are taking active measures to improve our gender balance - from a starting point where representation of women at professional and especially management levels was well behind rates in the UN.

So with the benefit of hindsight, has our reform worked, how could it be improved, and what lessons might the UN learn from it?

First, it is clear that reform - however vital for the long term - is always a disruptive process. Perhaps particularly in the international environment, there is enormous fear of structural change. And this distrust comes not only from staff, but also from Member States. The only solution is effective and honest communication throughout.

It is also clear that delivering the legal and policy instruments of reform is only the beginning. There has to be continuing commitment by senior management to implementing reform - a belief that it is possible in spite of the pain of transition. Otherwise, institutional inertia will take over, and the new policies will be gradually deformed until they result in the old outcomes.

Reform is thus a process, and requires cultural change. It needs rolling-out and not a big-bang overnight.

One of the most difficult issues for both Commission and UN is to achieve the right balance between empowering staff and managers, and retaining control by Commissioners at the centre commensurate with their political accountability.

I think this is a major challenge for any governmental organisation: compared to the private sector, there is no equivalent of the simple measure of profitability to determine whether a particular approach should be pursued. In government - particularly at the international level at which we operate - the interaction between different policies is very complex, so effective co-ordination is vital. And what ever our internal arrangements, it is the Commissioners - the politicians - who will be held publicly accountable for what is done by the institution. Yet it is equally clear that central, top down control does not result in effective policy, and demoralises staff in the process. We have yet to solve this issue adequately - it will depend on carefully fine-tuning systems, and also on educating all stakeholders about the constraints if any system is to have the flexibility to function.

A major element of our reform was therefore to try to distinguish between policy and programme formation and design, and implementation tasks. The former were seen as core tasks, linked to the Commission's position as having the sole right to propose policy initiatives. The idea was that if the policy design was clear, the implementation phase could essentially proceed automatically, without further political involvement. Implementation was moved to various offices and agencies semi-independent of the Commission. The hope was that the centre would be free to concentrate on the core tasks and important strategic thinking, while agency managers would be empowered to structure their activities in the most efficient manner. The agencies would also be able to employ less skilled and less expensive staff.

In practice, we have found that the boundary between policy and implementation is fuzzy, and that it is very difficult to insulate the Commission from the consequences of failings in the agencies. Further, there are inefficiencies. Agencies tend to recreate core support services - finance and HR for example - that were previously provided by the Commission. And their management boards tend to blur the lines of accountability. So agencies are certainly no panacea. And even within the core organisation, I think we must do further work on the balance between autonomy and top-down political control.

Another further difficulty we have encountered in delivering real reform is that we may sometimes have created yet further bureaucracy in the process. This has happened sometimes as a consequence of putting in place stronger controls to address inadequacies revealed by past problems. Sometimes new policies have been over-documented to ensure they are properly applied. Sometimes it is simply that in the rush to implement change, procedures were poorly designed. Whatever the cause, the result has been to somewhat discredit reform, and I have therefore just launched a "simplification" campaign, in which staff are invited to submit their ideas for improvements. So far, the response has been very encouraging. We also have an on-going programme to adapt all our internal procedures for delivery by IT - E-Commission as we call it.

In spite of its limitations, management reform is improving the ability of the Commission to deliver. But is it enough to restore our political legitimacy? Will it be enough for the UN?

It is I think clear that management reform is a necessary condition to restored confidence - if we cannot deliver what we promise in a reasonably efficient and timely fashion, we are not credible. But it is not sufficient. While improved results on the ground and fewer scandals will stem the flow of negative publicity, this will not address the basic problem that too few people really understand the work of the institutions, or the continuing relevance of a mission established in the 1940s and 50s in the early 21st Century. In essence, if something goes wrong in the administration, the damage is substantial. If things go smoothly, this will not be reported. We can only gain approval through results in policy, not in delivery.

Further, both our institutions still work on the basis of technocratic policies worked out in endless meetings. Decisions are taken by a no doubt worthy elite for the people - the people often being represented by a complex web of lobbies and NGOs as well as traditional government. Today, many more of our citizens expect to follow how policy is made, and to see their wishes considered in the process. It is for this reason that in the Commission, we have just launched a transparency initiative, aimed at ensuring full information is available on who lobbies for what policy, who gets what money and how it is spent. The initiative will again seek to strengthen ethical standards across the European institutions, in particular concerning declarations of interest. But this will be a difficult discussion - previous experience shows that getting agreement between institutions, and across the varying cultural norms even within Europe is hard.

To conclude then, our experience in Europe shows that reform is possible, but needs commitment from the highest managerial and political levels if it is to overcome institutional inertia. And all stakeholders need to "buy-in" to the process, to understand how it will genuinely help their institution deliver better in the future.

But equally, management reform is only part of the story - there must be sufficient common vision on the goals and values of the institution to carry it into the future.