CHAPTER ONE

INTRODUCTION

This chapter outlines the background of the study, statement of the problem, research
objective, scope of the study, significance of the study, methodology of the study and the
organization of the paper.

1.1 Background

Many developing countries suffer from endemic poverty, slow economic growth, unequal
distribution of income and wealth, caused by low and inefficient investment, shortage of
foreign exchange and lack of effective government services.

Consequently, one of the fundamental challenges of most developing countries is how to

get their economy out of poverty. A number of alternative policies and strategies have
been designed and tried to develop their economies. In all cases, no single factor is
assigned as important as investment in bringing about economic growth. Developing
countries or emerging economies acknowledge that investment could be a source of
economic growth through development and modernization (Kazembe and
Namizinga,2007:6).

Poverty is almost invariably linked to unemployment, investment can be an essential tool

for creating new job opportunities in the formal economy, with indirect effects on the
informal sector (ibid:13).

Especially private investment is a powerful catalyst for innovation, economic growth and
poverty reduction. Private investment in general and Foreign Direct Investment \FDI\ in
particular has been shown to play an important role in promoting productivity, creating
new employment, stimulate innovation and transfer technology to enhance and sustain
economic growth in developing countries ( Korneck and Raghayan,2008:2). It has also
been shown that FDI works as a means of integrating developing countries in to the

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global market place and increasing the capital requirements for investment, thus leading
to an increase in economic growth to reduce poverty and raise living standards (ibid:20).
Though development literatures agree on the fact that investment is undoubtly one of the
primary engines of growth in all economies, its effectiveness rests on strong
complementarities with other elements, of which one is establishing attractive business
environment.

Over the past two decades many countries have implemented broad ranging economic
reforms, including the liberalization of domestic markets and some privatization, which
had an effect on the flow of investment and to create a conducive environment for
attracting investors.

Ethiopia is one of the countries that recognized the need for reform in response to public
demand for better services and to attract investment. Political, economic and social
changes have taken place in Ethiopia since the establishment of the Transitional
Government. One of those policy changes is the shift towards the market-oriented
economy and the establishment of conducive investment environment (Ethiopian service
delivery policy, 2001:1-2). Ethiopian investment policy is aimed at encouraging the
private economic sector in general and the private investment in particular to relieve the
country from poverty.

The efficiency and effectiveness of the civil service, in general, and of service delivery,
in particular, is of vital importance for a successful implementation of these changes in
policy and strategy. Besides, public service delivery improvement contributes to the
st
establishment of administrative machinery that can face the challenges of the 21
century. To this end, the Government has initiated a comprehensive civil service reform
program, of which service delivery is a component (ibid: 2).
The Addis Ababa City Government which is mainly governed by a charter that ensures
its autonomy and accountable to the Federal Government of Ethiopia is also conducting
several organizational, procedural and management changes to relieve the city from
poverty and backwardness by ensuring good governance. In connection with this, the
government is also operating by giving special attention to investment, based on its

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consistent objective to encourage and strengthen the private sector of the economy, which
is the operating motor of the industrial development strategy (Addis Ababa investment
authority, 2007:1).

Addis Ababa City Government Investment Agency (AAIA) was established with its self
power and duty under proclamation NO 2/2003 so as to create optimum situations for the
investors and expand the investment activities of the city. The agency currently provides
various services and performs several activities and researches that support the promotion
of the city’s investment.

As stated earlier, investment is a backbone for economic growth. Thus, in order to attract
investment on a sustainable basis, creating an attractive business environment and
improving its service delivery that satisfies customers is vital. Customer satisfaction is
considered as a prerequisite for customer retention and loyalty, and obviously helps in
realizing economic goals like profitability, market share and return on investment. Addis
Ababa City Government Investment Agency took this in to consideration and started to
improve its service delivery. The best way that the Agency used to improve its service
delivery is implementing the service delivery sub program which is the component of
civil service reform program .And in order to implement the service delivery sub program
the Agency has been taking an assessment on the previous service rendering process.

This study is therefore, aimed at examining the level of customer satisfaction by Addis
Ababa Investment Agency service delivery and to identify the problems faced by the
investors during receiving the services of the agency.

1.2 Statement of the Problem

It is clear that good governance is fundamental for the social and economic well being of
every nation. A responsible and accountable public administration is essential for high
quality public services that facilitate poverty reduction. In addition, reform and
modernization save resources and close social and gender gaps, providing an enabling
platform for private sector development (Price water house coopers, undated: 11).

3
 Modern service delivery, which has been a distinguishing feature of the private
sector, has become a typical issue among government as well as non-government
institutions in their recent attempts to transfer good management practices from the
private to the public sector. In short, improved service delivery increases the cost
effectiveness, coverage and impact of services (Ethiopian service delivery policy,
2001:1).

Taking this in to consideration, the Ethiopian Government undertook a

comprehensive civil service reform program by the year 2001, of which service
delivery is a component. The service delivery sub-program is designed to improve the
quality of service provided by public sector. To this end the civil service institution
have the responsibility to follow an appropriate and improved system of service
delivery so as to give services to the public in an effective, efficient, transparent and
impartial manner. The employees of the civil service institutions have also
responsibility and obligation to provide quality service to the public fairly, equitably,
honestly, efficiently and effectively.

Addis Ababa Investment Agency which is established to facilitate, coordinate and

promote private investment in the City Administration is one of the civil service
institutions that implemented the package of reforms including service delivery
sub- program to improve the quality of its service. However, the service delivery
encountered problems in the following aspects:

1. Problems related to meeting service standards

Even though the agency sets time standards for each services in actual situation, as the
researcher observed and according to the investors’ suggestion, there are customers
who are served with extended time (above the standard time) and thus, the Agency
does not meet its standard time as well as customers' expectation.
2. Problems related to complaint handling
The Agency has set a system in which investors can file their complaints. However,
the Agency did not assign a responsible person and a clear procedure to address
complaints.

3. Problems related to turnover of employees and shortage of the required professionals.

4
 Professionals are leaving institutions and the country due to different reasons. This in
turn has a direct negative impact on the effectiveness of the service delivery system.
Due to this problem there are some activities which were planned but not implemented.
4. Problems related to incentives and trainings for employees.
Quality service means intelligent use of incentives as well as intelligent training.
However, as the researcher observed in the agency’s annual reports Addis Ababa
Investment Agency has weak performance in relation to provide the necessary
incentives and related trainings for its employees.
5. Lack of attractive working environment and reception area
Facilities like comfortable offices and other facilities for employees and well furnished
reception area for customers are not fulfilled.
6. None availability of photo copy service.
Since there is no photo copy service within and near to the agency, the investors face
problem in getting copies of required documents.
Therefore, these facts highly require an effort to critically assess the service delivery
process of the Agency and to identify problems that affect the service delivery as well as
customers' satisfaction.

1.3 Objective of the Study

The major objective of the study is to identify the problems faced by the investors
during receiving the services delivered by Addis Ababa Investment Agency and
examine the level of investors’ satisfaction. Specifically the study attempts:
To identify the problems related to the Agency’s service delivery

To assess the availability of facilitating environment including

comfortable . and enough reception areas, photo copy services, ethical and
polite employees.
To examine the level of satisfaction of investors with the prevailing
service delivery system of the agency
Propose possible mechanisms through which service delivery can improved
and the level of customer satisfaction can be raised.

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1.4 Scope of the Study
The scope of this study is limited to examine the level of customer satisfaction with in
the service delivery of Addis Ababa Investment Agency. Though the other regions of
the country have also their own investment offices that are rendering investment
service the study is limited to Addis Ababa Investment Agency only. Addis
Ababa Investment Agency was selected for the study because first, it is a service
giving government organization where there is high customer contact; second more
than 50 percent of the country’s investment flow is found in Addis Ababa. Thus, the
researcher believes that customer satisfaction is one of the top issues in
investment service delivery that concerned bodies must be aware of it.

1.5 Significance of the Study

The study reveals the actual situation of the Addis Ababa Investment Agency service
delivery system and its impact on customer satisfaction. So, the findings of the study
will assist the authorized bodies of the Agency to understand problems faced by
investors during receiving the services provided by the agency and initiate them
to find out solution. Further more the study may also use as a stepping stone for
further study.

1.6 Methodology of the Study

1.6.1 Data type and Source

Both primary and secondary data sources were used in carrying out the overall study.
The primary data was gathered from customers and employees of AAIA through
open and close ended questionnaires, interview and observation. On the other hand the
secondary data was taken from books, journals, on-line information on related
topics, reports, policies, plans and other documents of the Agency and the City
Administration.

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1.6.2 Sampling procedure and techniques

The type of the research design is a case study. During 2012 Ethiopian budget year, the
Agency has provided various services for 3,916 projects. Taking only six months data
of the above mentioned budget year, 1,958 investors were taken as target population for
the collection of primary data. Hence, by taking 10 percent of six months data the
sample size of the customers is 196. In addition to customers primary data was collected
from 18 out of 24 employees including the general manager. The questionnaire was
distributed excluding drivers and janitor by using purposive sampling technique and
all the 18 questionnaires were returned and analyzed. However, among the total
questionnaires distributed to customers, four of them were not returned, hence, the
researcher analyzed 192 questionnaires. The researcher used non probability i.e.
purposive/judgment sampling technique. Because the method has the advantage of
getting in depth information with limited time and money.

1.6.3. Data Gathering Instruments and Method of Data Analysis

The primary data from sample customers and employees are collected through data
collector. Two types of questionnaires were prepared by the researcher for customers
and employees. Except few questions, the nature of the questionnaires is close ended.
Since, it is easier for the respondents to express their idea exhaustively in Amharic
than in English, questionnaires are prepared in Amharic. In addition, Interview was
conducted with the general manager of the Agency and personal observation is made.
The collected data were analyzed using relevant statistical methods. Specifically,
the statistical methods utilized were descriptive statistics such as frequencies, ratios
and percentages. Moreover, the data are presented and interpreted using discussions and
tables. Thus, both qualitative and quantitative methods of data analysis were used.

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1.7 Organization of the Paper

The paper consists of four chapters. The first chapter is an introduction part which covers
topics like background of the study, statement of the problem, objective of the study,
significance of the study, scope of the study methodology, and structure of the paper. The
second chapter explains about the theoretical perspectives of investment service delivery. It
includes theories, and concepts related to the subject matter. The third chapter presents
work schedule and budget breakdowns of the study

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 CHAPTER TWO
REVIEW OF RELATED LITRATURES

2.1 Introduction
This part of the study reviews the reforms undertaken for improving public sector
performance and enhances the delivery of investment service, which may have wider
applicability to Ethiopia in particular, and developing countries in general. Besides the
chapter discusses the various theoretical perspectives of service and service
delivery which are related to investment.

2.2 The Concept of Service and Public Service

Because of their diversity, services have traditionally been difficult to
define. Complicating matter is the fact that the way in which services are created
and delivered to customers is often hard to grasp, because many inputs and out
puts are intangible. Most people have little difficulty in defining manufacturing or
agriculture, but defining service can elude them. As a result services have been
defined in various ways. The variety of definitions can often explain the confusion
or disagreement people have when discussing services. The following are the
various definitions of service given by different authors. According to Stanton
(1986 cited in Mohanty & Lakhe, 2002: 24), services are

Those separately identified and essentially intangible activities that

provide want satisfaction and that are not necessarily tied to the sale
of a product or service. To produce service, we may or may not
require the use of tangible goods. However, when such use is required,
there is no transfer of the title of these tangible goods.

Kotler, as cited by Mohanty & Lakhe (2002: 24), also defines service as any kind of
performance that one party can offer to another that is essentially intangible and does
not result in the ownership of anything. Its production may or may not be tied up with
a physical product.
9
Quinn et al, cited by Mohanty & Lakhe (2002: 24), consider service sector to include all
economic activities whose out put is not a physical product or construction, is generally
consumed at the time it is produced and provides added value in forms that are essentially
intangible. While goods are tangible products, services are intangible products. Thus,
services are those activities that provide want satisfaction in the form of an experience
through the processing and transformation of a person their possessions or information.

Clow and Kurtz (2003: 3) put the definition of service in the simplest terms as:
“Services are deeds, process, and performances”. Compatible with this simple,
broad definition is one that defines services to include all economic activities whose
output is not a physical product or construction, is generally consumed at the time it
is produced, and provides added value in forms (such as convenience,
amusement, timeliness, comfort, or health) that are essentially intangible concerns of
its first purchaser.

In order to capture the essence of service, Christopher and Lauren, (1999: 5) have
established the following two approaches:
1. A service is an act or performance offered by one party to another. Although
the process may be tied to a physical product, the performance is
essentially intangible and does not normally result in ownership of any of
the factor of production.
2. Services are economic activities that create value and provide benefits
for customers at specific times and places, as a result of bringing about a
desired change in-or on behalf of the recipient of the services.

More humorously, services have also been described as “something that may be
bought and sold but that can not be dropped on your foot” (Christopher and Lauren,
1999:5).
Public service: Public service, particularly, refers to those activities of government
institutions aimed at satisfying the needs and ensuring the wellbeing of society as well
as enforcing laws, regulations, and directives of the government (Ethiopian Service
Delivery Policy, 2001:1)

10
Answers.com defines public service as ‘a term usually used to mean services provided
by government to its Citizens, either directly/ through the public sector/ or by
1
financing private provision of services’ . (Available at:
http://www.answers.com/topic/public- services. Accessed on10 April 2009).

Yeman, (undated: 5) defines public service as ‘Any act or performance that public
institutions provide to fulfill social needs’. This entails a dynamic interaction between
service providers and recipients that operate in a changing environment that may
shape the outcome of the implementation of Service Delivery Reforms

Service Delivery: Service delivery basically refers to the systematic arrangement of

activities in service giving institutions with the aim of fulfilling the needs and
expectations of service users and other stakeholders with the optimum use of resources
(Ethiopian Service Delivery Policy, 2001:1).

2.3 Principles of Quality Customer Service

There are many sets of principles regarding service delivery developed by individual
authors and various governmental agencies and departments of various countries.
One of them is the eight principles of Batho Pele (people first), which the South
2
African Public Service Administration initiated . (Available at:
http//www.dpsa.gov.za/batho- pele/principles.asp. Accessed on 23 April 2009).

The Eight Batho Pele principles were developed to serve as acceptable policy and
legislative framework regarding service delivery in the public service. The principles
are the following:

1. Consultation
Consulting service users or citizens through different ways to ensure
“comprehensiveness” and “representativness.”

1
Answers. Com: Public Service. Available at: http://www.answers.com/topic/public-services. Accessed on 10 April
2009.

11
2
Batho Pele: Principles. Available at: http://www.dpsa.gov.za/batho-pe le/principles.asp. Accessed on 23 April
2009.

12
2. Setting service standards
Precise and measurable standards of services should be set so that users can
judge for themselves whether or not they are receiving what was
promised. Users should also be involved in the process of setting standards.
3. Increasing access
Public information as well as services should be accessible to citizens. Access
to information and services empowers citizens and creates value for money,
quality services. It reduces unnecessary expenditure for the citizens.
4. Ensuring courtesy
Citizens should be treated with at most consideration and respect in the service
delivery process i.e. in communication of services, products, information
and dealing with problems.
5. Providing information
Available information about services should be at the point of delivery, and for
users who are far from the point of delivery, other arrangements will be
needed. Staff members should also be avail with the necessary information.
6. Openness and transparency
Citizens should have the opportunity to know how public institutions
operate, how they utilize resources and who is in charge. This will help to
improve service delivery by considering the suggestions of the public and
to even make government employees accountable and responsible.
7. Redress
Public organizations need to identify quickly and accurately when services are
falling below the promised standard and to have procedures in place to
remedy the situation. Citizens should also be encouraged to file their
complaints.
8. Value for money
Public organizations should be careful to provide service economically,
efficiently, and effectively so that citizens can get the best possible value for
money.

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2.4 Characteristics of services
Services have a number of distinctive characteristics which differentiate them from
goods and have implications for the manner in which they are marketed. These
characteristics are often described as intangibility, inseparability, variability, and
perishability (Clow and Kurtz, 2003: 9-12).

2.4.1 Intangibility

Intangibility refers to the lack of tangible assets of a service that can be seen, touched
smelled, heard, or tasted prior to purchase. Services vary in the degree to which they
are intangible; however, for most services there are tangible items that are used to
perform the service.
To reduce intangibility, services have several options, such as:
 Stressing tangible cues
 Using personal sources of information
 Stimulating word-of-mouth communication
 Creating a strong corporate image and
 Encouraging employees to communicate with
customers.
All of the above strategies make a service more tangible.

2.4.2 Perishability

Perishability refers to the inability of a service to be inventoried or stored. This is to

mean that the service can not be inventoried or stored. If a good does not sell today,
a retailer can store it and sell it at a later time. This feature allows firms to mass
produce goods and store them in warehouses until consumers are ready to purchase.
For services this is not possible.

In the case of service, sometimes demand may be less than supply and in another time
demand can be greater than supply. In both cases there is loss of potential revenue, i.e.
in the case of less demand there will be unsold services, and unsold services are lost

14
there will be shortage of service i.e. demand outweighs supply and potential
revenue is lost because of fixed service capacity.

To reduce the negative impact of perishability, the service provider has to

develop strategies to deal with demand, supply and capacity. The goal is for demand
and supply to match, which should be close to the capacity of the service provider.

2.4.3 Inseparability

Inseparability is the simultaneous production and consumption of services. Goods can

be produced and then sold at a latter time; services can not. In this case the quality of
the service is highly dependent on the ability of the service provider and the
quality of interaction between the service provider and the customer. Managing the
human element is critical for success for service provider with a high degree of
inseparability.

To reduce the dependence on customer-employee interaction, companies may look

for ways to automate their service through the use of machines and computers. In
addition it is important for the service firm to hire competent employees and then
train them to perform the service. The service firm needs a process for
managing customers so customers will have positive feelings about the interaction
between employees and themselves.
2.4.4 Variability

Variability refers to unwanted or random levels of service quality customers

receive when they patronize a service. Variability is primarily caused by the human
element, although machines may malfunction causing a variation in the service.
Various service employees will perform the same service differently and even the
same service employees will provide varying levels of service from one time to
another. To reduce the variability of services, standardization and quality control
measures can be used. By standardizing the service, customers will tend to receive
the same quality of service regardless of who performs the service and when the
service is performed.
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In addition, if machines can be incorporated in to the service machines tend to be
more consistent, in terms of quality production, than humans.

However, because of the variability characteristic of services, standardization, or

services that follows a standard set of procedures and processes for all customers
and quality control are still more difficult than setting standards for goods.

2.5 Factors Affecting Service

As it is stated by wikipedia the delivery of a service typically involves six factors:

 The accountable service provider and his service suppliers
 Equipment used to provide the service
 The physical facilities
 The requesting service consumer
 Other customers at the service delivery location
 Customer contact

2.6 Customer Satisfaction

Service quality and customer satisfaction are inarguably the two core concepts
that are at the crux of the marketing theory and practice. In today’s world of
intense competition, the key to sustainable competitive advantage lies in
delivering high quality service that will in turn result in satisfied customers.

Satisfaction is the customers' evaluation of a product or service in terms

of whether that product or service has met their needs and expectations
(Zeithaml & Bitner, 2003:86). Failure to meet needs and expectations is
assumed to result in dissatisfaction with the product or service.

Satisfaction is influenced by perceptions of service quality, product quality, and

price as well as situational factors and personal factors. It may also be associated
with feelings of pleasure for services that make the consumer feel good or are
associated with a sense of happiness. For those services that really surprise the

16
 consumer in a positive way, satisfaction may mean delight. And in some
situations where the removal of a negative leads to satisfaction, the consumer

may associate a sense of relief with satisfaction (Zeithaml & Bitner, 2003:86).

In public sector, customer satisfaction does not mean to ignore rules and regulation
in order to satisfy the customer. It is rather the ability to create and maintain good
and lasting relation ship with the customers. Service delivery means the services
provided by public sector are fast, of quality and satisfy the customer.

Although it is possible to measure consumer satisfaction at a particular point in

time as if it were static, customer expectations and satisfaction are dynamic,
movement target that may evolve over time, influenced by a variety of factors
(Zeithaml & Bitner, 2003:86). Therefore, organizations need to monitor customer
expectations and satisfaction on a continuous basis and to be innovative in
order to respond meaningfully to changes about the customer's expectation.

2.7 Domains of Satisfaction

Because satisfaction is basically a psychological state, care should be taken in the

effort of quantitative measurement. Taking this problem in to consideration in the

1990s researchers defined ten “Quality Values” which influence satisfaction behavior,
in 2002 further expanded and redefined as the ten domains of satisfaction. These ten
domains of satisfaction include: Quality, Value, Timeliness, Efficiency, Ease of
access, Environment, Inter-departmental Teamwork, Front line Service
Behaviors, Commitment to the customer and Innovation. These factors are
emphasized for continuous improvement and organizational change measurement
and are most often utilized to develop the architecture for satisfaction

measurement as an integrated model3

(Available at:http://en.wikipedia.org/wiki/customer_satisfaction. Accessed on 30

September 2009).

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2.8 Public Sector Reform

The “Public Sector” is broadly synonymous with “government” (Schater, 2000: 3).
Government is instituted to manage the public service effectively and efficiently in a
way that both economy and other government institutions would be propelled to meet
the yearnings of the people and at the same time satisfy their material well being. So,
government is very central to the lives of the people because it is a very crucial
economic agent in any nation. However, across most African countries, the
legitimacy of government is being called question as a result of visible signs of
failer of governance and consequently that of economy. To fix these problems Public
Sector Reforms (PSR) were designed, most of which are flourished by New Public
Management (NPM).

Even though there have been different definitions with regard to the meaning of public
sector reform, the fact remains that many people and researchers see it as the attempt
by government of particular country to change ways of doing things. That is why
Schacter (2000:1) defines public sector reform as the ‘strengthening the way that the
public sector is managed’.

Generally speaking public sector reform is a deliberate and planned effort to introduce
useful changes in the structure and process of public organization with the aim
of bringing about efficiency, effectiveness, transparency, and openness in service
delivery. Change may consist of a change in structure where by big organizations are
split in to smaller ones and dispersed over a large area to make them easily accessible
or mergers of small organizations in to a bigger one for close monitoring. Change may
also consist of process change, e.g., introduction of new procedures to obtain or
deliver a public service or introduction of new budgeting or performance evaluation
techniques. Most scholars agree that public sector reform is a merger of management
with public administration. A commonly used technique in almost all countries
whether developed or developing is the introduction of private sector management
practices to public sector organizations with the aim to minimizing cost and
improving efficiency and productivity (Weubamlak et. al,2007: 4)
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 2.9 Public Sector Reform in Developing Countries and its Impact on
Service Delivery

Like in other areas of the world public sector reform in developing countries in
general and in sub-Saharan Africa (SSA) in particular has been evolving over time.
Developing countries have generally experienced three waves of reforms. However,
the waves are not well defined and there is considerable overlap (as shown in figure 1
below).

Figure 1: Waves of Public Sector Reform

Service Improvement wave 2000

Capacity Building Wave 1990s

Structural Reform Wave 1980s

Source: OECD (2002:2)

According to the organization for Economic Co-operation and Development

(OECD,
2002:2-6) the period when each waves covered and their objectives are generalized
and presented as follows:
The first wave covered the decade of mid-80s to mid-90s. Its distinctive
feature is its focus on restructuring the public service. This has been aptly
described as the structural reform wave
The second wave was dominant in the late 1990s. its predominant trait is
capacity building and
The third wave started about 2000, with the particular objective to
underline improved service delivery
The principal objectives of the first and the second waves were:
The first wave, sponsored by the World Bank and the International Monetary Fund
(IMF), aimed at Government cost reduction and cost-containment through divesting non-
19
core operations, retrenching redundant staff, removing ghosts workers from the payroll,
freezing employment and adopting measures to control the wage bill and other personnel-
based expenditures.

The second wave, initiated by the UNDP and World Bank-led donors, aimed at capacity
building assuming that capacity building would naturally lead to improved service
delivery.

Even though they have the above mentioned objectives, the first and the second waves of
Public Sector Reform Programs (PSRPs), however, failed to impact positively on service
delivery. Nonetheless, the structural PSRPs (the first wave) had some limited enclave
successes in improving service delivery; on the whole, however, it failed to impact
positively on service delivery because of the following problems and challenges:
Lack of direct linkage of the programs, strategies and interventions to
improvements in services.
Specifically the freeze in recruitment undermined the need for capacity
building for service delivery.
There is a general lack of ownership of the reforms and commitment to its
implementation by those involved, and little public support for the programme.
Lack of political understanding and support for structural PSRPs.

Since public services continued to deteriorate because of the above mentioned problems
and challenges of the first wave the political and public pressure on improving these
services lead to the launching of the second wave with an assumption that weak capacity
was the root problem in the poor delivery of public services. There were therefore,
capacity building interventions to improve service delivery. The key interventions were
enhancing staff skills, improving management systems and structures, restoring
incentives and improving pay and work environment. However, the capacity building-
oriented PSRPs also did not have any perceptible impact on service delivery. This is so
because of the absence of effective pay and incentives the moral and discipline in the
public service remained low, and unethical conduct in ways of bribery and corruption
were on the rise. Consequently, service delivery continued to deteriorate.

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As a result of the perceived inadequacies of the first and second waves of PSRPs the third
wave was launched focusing on service delivery improvement. In addition the focus on
service delivery improvement originated from six factors. As shown briefly appended
below:
The need to demonstrate early results
Public demands for transparency and accountability
The shift to market economies and private sector-led economic growth
Influence on “new public management”
The need for PSRPs to support sector-wide approaches and
Pursuit of an integrated systems approach

The second to fourth factors are related and reflect a response to global impact on the
environment in which the states will operate in future. The first, fifth and six factors
present a more strategic approach in the design of PSRPs (OECD, 2002: 2-6).

2.10 New Public Management

In the age of information and globalization the world has changed. The intense business
competition requires higher standard of public service. But, the slow, burdensome,
bureaucratic, and corruptive culture in public service, are seen as a barrier to customer
satisfaction and economic growth. Therefore, Governments across the globe are
searching for ways to improve public services in general and investment service delivery
in particular. To this end, during the last twenty years there has been a pandemic of
public-sector reforms initiated to enhance efficiency and effectiveness in public service
delivery. During this period many countries have been implemented broad ranging
economic reforms, including the liberalization of domestic markets and some
privatization, which has had an effect on the flow of investment. Many of the public
sector reforms are associated with the New Public Management (NPM). New Public
Management is said to be inspiring many (but not all) reforms around the world making
citizens in developing countries aware of improved public service due to knowledge
transfer (Yemane, undated: 7).

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ECA (2003:19) defines NPM as “New Public Management (NPM) is a label used to
describe a management culture that emphasizes the centrality of the citizens or customer,
as well as accountability for results”. It captures most of the structural, organizational and
managerial changes taking place in the public services, and a bundle of management
approaches and techniques borrowed from the private-for-profit sector.

Wikipedia the free encyclopedia defines new public management as: “NPM is a
management philosophy used by government since the 1980s to modernize the public
sector”. New public management is a broad and very complex term used to describe the
wave of public sector reforms through out the world since the 1980s.Wikipedia further
states that the main purpose of NPM-reform wave is that more market orientation in the
public will lead to greater cost-efficiency for governments, without having negative side
effects on other objectives and considerations.

Some modern authors, Dunleavy, Margetts et al (2006 cited in Wikipedia) defines New
Public Management as “a combination of splitting large bureaucracies in to smaller, more
fragmented ones, competition between different public agencies and between public
agencies and private firms and incentivization on more economic lines”.

The underlining essence of NPM can be explained by the new trend in public
administration to transfer some important insights and values from the private sector to
the public arena, values like efficiency, effectiveness, flexibility, responsiveness,
competition, result oriented management, more explicit and measurable performance
standards, more active control based on present output indicators, accountability etc. This
should improve customer-oriented services (Hood, 1995; Pollitt, 1993; Rouse, 1999;
Pollitt and Bouckaert, 2000; Polidano, 1999; Lane, 1997 cited in Yemane, undated: 5).

The key components of NPM may be put in to two broad strands- those that emphasize
managerial improvement and organizational restructuring, and those that emphasize
markets and competition. The basic foundation of the NPM movements is the drive for
efficiency and the use of the economic market as a model for political and administrative
relationships (ECA, 2003: 20).

21
New Public Management has certain doctrines. According to Hood (1991 cited in ECA
2003:20), the major NPM doctrines are:
Direct public costs should be cut and labour discipline raised so as to improve
resource use;
Private-sector-style management practices applied to increase flexibility in
decision-making;
Competition in the public sector (through term contracts and tendering) increased,
as rivalry is the key to lower costs and better standards;
The public sector disaggregated and decentralized to make units more manageable
and to increase competition among them;
Controls shifted from inputs to outputs, to stress results rather than procedure;
Explicit standards and performance measures established, because accountability
requires clearly stated aims and efficiency requires attention to goals; and
Managers given powers to conduct hands-on professional management, because
accountability requires clear assignment of responsibility, not diffusion of power
(ECA, 2003:20).

The literature marks 'New Public Management' as a strong intellectual paradigm based on
public choice theory and agency theory and shows that it has different causes. The
following are the causes of NPM (Weubamlak, 2007: 3-4).
The first cause is considered to be the short comings of public sector
administration and, hence, the need for a wholesale adoption of private sector
values such as 'risk-taking,' 'customer focus' and 'bottom-line orientation'
(Larson, 1997: 131).Others have pointed out that the assumption behind NPM
is that private management is superior to public management; therefore, private
sector techniques should be 'imported' in to public administration (Shand, 1996;
Larb, 1999 cited in Weubamlak, 2007: 3 ).
The second reason is the need to overcome the inefficiency and infectiveness
caused by traditional monolithic bureaucracies,
The third major cause for NPM revolves around the role of government. NPM
proclaims that the preferred role of government should be changed from acting

22
 as the principal vehicle of socio-economic development to that of guiding and
facilitating that development (Kaul, 1997 cited in Weubamlak, 2007:3). It is
also argued that government should move from a concern 'to be' towards a
concern 'to ensure that things are done.' The managerial focus should also be
directed away from ‘formal process' towards 'results'. The broad objectives of
such reforms have been to shift emphasis of government from developing plans
to developing key strategic areas, to shift emphasis from inputs and processes
to outputs and outcomes, and to shift emphasis towards managing diversity
within a united public service.
The fourth major reason for NPM is the need to have a decentralized
management. Here the major areas of emphasis are breaking up the huge public
bureaucracies into more autonomous business units of executive agencies, and
giving managers increased control over budgets for which they are accountable.
It also involves 'de-layering' of vertically integrated organizations (replacing
traditional tall structures with flatter and more responsive structures);
downsizing or rationalizing and trimming the public sector in order to achieve
‘leaner’ (small and compact) and 'meaner' (cost effective) public service;
divorcing the provision from the production of public services; adopting new
forms of corporate governance, and moving a board of directors model in the
public service (Larbi, 1999 cited in Weubamlak, 2007:4).

Moreover, it could be argued that NPM has been pushed largely by a combination of
economic crises and geo-political changes resulting in reduced financial resources for
government. It is also pulled by a sense of new possibilities and the development of a
new set of managerial strategies that promise to lever greater results from fewer
resources. Generally, it could be said that the 'New Public Management' is essentially a
distinctive set of ideas about the purposes, organizations and operations of governments
and their administrative agents (Warrington 1997 cited in Weubamlak, 2007: 4).

The era of big government was coming to an end. One had to look at the most
entrepreneurial, flexible, creative, responsive public agencies to find what would be next

23
in government. Ten principles for the future were summed up in the chapter headings of
the Osborne and Gaebler book who epitomized this new thinking. The principles are:
1. Catalytic Government: Streeng rather than Rowing
2. Community-owned Government: Empowering rather than serving
3. Competitive Government: Injecting competition into service delivery
4. Mission-Driven Government: Transforming Rule-Driven organizations
5. Result-Oriented Government: Funding outcomes, not inputs
6. Customer-Driven Government: Meeting the needs of the customer, not the
bureaucracy
7. Enterprising Government: Earning rather than spending
8. Anticipatory Government: Prevention rather than cure
9. Decentralized Government: From hierarchy to participation and teamwork
10. Market-Oriented government: Levering change through the market

Putting it all together public servants were not the problem but the system in which they
were worked (Caiden, 2006: 13).

In addition to the causes and principles the’ New Public Management' constitutes a
comprehensive set of elements that touches the whole area of governmental structures
and activities. The following can be considered to be some of the main elements in the
‘New Public Management' (Larbi,1999; Warrington, 1997 cited in Weubamlak, 2007:4-
5):
Redefining the relationship between political policy making and administrative
policy implementation by distinguishing the roles and responsibilities of senior
administrators from that of politicians;
Replacing the highly centralized hierarchical organizational structures with a
decentralized management environment where decisions on resource allocation
and service delivery are taken closer to the point of delivery;
Making public services more responsive to the needs of the people who use them
and considering users of the services as active consumers;

24
 Designing management structures for actual or potential competition among
government owned and private sector providers of public service so as to provide
pressure for efficiency and effectiveness;
Enabling managers within government to act as public sector entrepreneurs, fully
utilizing the value of capital, goods and staff within government to deliver
specified objectives;
Introducing a financial management and accounting system which has such
components as output-oriented systems, accrual accounting capital charging and
budgeting based on outputs and outcomes;
Harnessing information technology to be used in areas such as revenue collection,
financial management and accounting, interdepartmental communication systems,
human resource management, delivering improved service to the public and the
like;
Completely revising the traditional public service personnel management policies
and instituting systems and replace them with new and modern ways of doing
things.

As can be seen from the above points, New Public Management shifts the emphasis from
traditional public administration to public management. This is to say that the traditional
model of organization and delivery of public services, based on the principles of
bureaucratic hierarchy, planning, centralization and direct control is apparently being
replaced by a market based public service management.

Public sector reforms may take various forms, such as restructuring without changing the
ownership, privatization, public private partnership, out sourcing, etc.

2.11 Alternative Service Delivery

Restructuring is a prominent theme with in the core of ideas comprising the New Public
Management. There has been a growing challenge to traditional ministries and
departments as the preferred organizational format to meet the goals of responsible
government and good public management. Governments have experimented with

25
alternative organizational designs because hierarchical, vertically-integrated departments
have proven too rigid and unresponsive in a public sector environment that is
increasingly complex, turbulent, and demanding. Unbundling bureaucracy through
Alternative Service Delivery (ASD) is an innovative response to the pressures of scarce
resources and the public’s insistence on improved, efficient, and effective service
delivery.

Alternative Service Delivery has been defined in many different forms by various authors
and countries. (Ford and Zussman 1997:6 cited in Good and Carin, 2003:4) define
'Alternative Service Delivery' as:

“. . . a creative and dynamic process of public sector restructuring that

improves the delivery of services to clients by sharing governance
functions with individuals, community groups and other government
entities."

Alternative Service Delivery is the organizational and structural dimension of improving

the government’s performance in delivering programs and services to citizens (Canadian
Alternative Service Delivery policy, 2002: 2).

Alternative Service Delivery entails the pursuit of new and appropriate organizational
forms and arrangements, including partnerships with other levels of government and
other sectors, in order to improve the delivery of programs and services. Innovative
organizational arrangements for delivering government programs and services can result
in:

More cost-effective, responsive delivery to citizens;

Changes in organizational culture and management practices so that the
organization performs more effectively; and
The granting of greater authority to managers thus moving decision making closer
to the point of delivery, to the communities served and to citizens (The Canadian
Alternative Service Delivery policy, 2002: 1).

26
Alternative Service Delivery has two parts:
1. Establishing the appropriate organizational forms with in government
departments, outside traditional departmental structures or outside the
public sector, to improve organizational performance; and
2. Bringing together organizations from across government, levels of
governments, or across sectors, through partnerships (for example, “single
windows," co-locations, or clustering of services to citizens) to
provide more seamless and citizen centered services (Good and Carin,
2003: 5).

2.11.1 Alternative Service Delivery Options

Alternative service delivery approaches involve the use of different options to deliver or
assist in the delivery of services. The seven alternative service delivery options that has
established by the province of Ontario are the following:
Direct delivery: Government delivers the services directly through its
ministries, and business planning by focusing on results, cost recovery, best value
for money and customer service
Agencies; Government delegates service delivery to a scheduled agency, but
maintains control over the agency
Devolution: Government transfers the responsibility for delivering services to:
Other levels of government Profit or non-profit organizations that receive
transfer payments to deliver the services.
Purchase of service: Government purchases the services under contract from a
private firm, but retains accountability for the service. This includes contracting out
and outsourcing of services.
Partnership: Government enters in to formal agreement to provide services in
partnership with other parties where each contributes resources and shares risks
and rewards
Franchising/ Licensing: For franchising, the government confers to a private firm
the right or privilege to sell a product or service in accordance with prescribed

27
 terms and conditions. For licensing, the government grants a license to a private
firm to sell a product or service that unlicensed firms are not allowed to sell.
Privatization: Government sells its assets or its controlling interest in a service to
a private sector company, but may protect public interest through legislation and
regulation (Good and Carin, 2003: 7).

2.12 Public Private Partnership

The reason why Public Private Partnership has been introduced is concerning with the
failure of government and the failure of market, which means that they can not perform
the basic function of maintenance and management in the society. The failure of
government means the lack of public services which we need in daily life.

Public Private Partnerships (PPP) recognize the fact that both the public and private
sectors have certain advantages relative to the other in the performance of specific tasks.
By allocating each sector to do what it does best, public services and infrastructures can
be provided in the most economically efficient manner.

According to wikipedia, Public Private Partnership is described as government service

and one or more private sector companies. These schemes are sometimes referred to as
3
PPP, P3 or P PPP involves a contract between a public sector authority and a private
party, in which the private party provides a public service or project and assumes
substantial financial, technical and operational risk in the project.
ECA (2005:3) defines PPP as:” The combination of public needs with private capability
and resources to create a market opportunity through which the public need is met and a
profit is made".

In some types of PPP, the cost of using the service is borne made by the private sector on
the strength of a contract with government to provide agreed services and the cost of
providing the service is borne wholly or in part by the government. Government
contributions to a PPP may also be in kind (notably the transfer of existing assets). In
projects that are aimed at creating public goods like in the infrastructure sector, the
government may provide a capital subsidy in the form of a one-time grant, so as to make

28
it more attractive to the private investors. In some other cases, the government may
support the project by providing revenue subsidies, including tax breaks or by providing
guaranteed annual revenues for a fixed period.

The contractual arrangements of PPP ranges from service contracts, management

contracts, leases, operations and maintenance concessions, capital investments to
divesture and asset ownership, through which variable levels of partnership are
established to improve levels of effectiveness, responsiveness and adequacy of public
services (ECA, 2005: 3).

In general a PPP is one of many sourcing options available to the government. At one
extreme, an agency can decide to provide a particular service it needs in-house. At the
other, it can decide to buy the service from an external provider with a minimal
contractual vehicle that requires little interaction between buyer and seller. A PPP makes
sense when:
1. Out sourcing is compatible with the buyer's broader strategic concerns and
2. The buyer and seller agree that the net benefits they can create together are large
enough to justify their investments in the PPP (Mei-Yun Yen, 2005: 10).

To investors, the PPPs was a successful enterprise and considered by some to be ‘the best
run independent agency’’ (Mwi-Yun Yen, 2005: 16).
However, government agencies must keep many activities in-house, even if a PPP could
be a cost effective alternative. Activities that require policy discretion, obligate the
government to commit resources, affect the value of private interests through regulatory
or judicial actions or potentially involve the application of controlled military or police
violence, for example, are ‘’ inherently governmental’’ ; they can not legally be
outsourced (Mei-Yun Yen, 2005: 7).

2.13 Privatization

Over the last decade there has been a widespread change of opinion about the role of state
and private enterprises in promoting economic growth. A strong consensus has emerged
that the achievement of more dynamic economic growth requires a greater role for the

29
private sector. Underlying this consensus is the belief that resources will be used more
productively if they are transferred to the private sector. A key element of this new
market orthodoxy has been the privatization of state-owned enterprises (Bouton and
Sumlinski, 1996:4).

Privatization refers to transforming government-owned organizations in to investor-

owned companies. Such kind of transformation has led to restructuring, cost cutting, and
a more market-focused posture. When privatization is combined with a relaxation of
regulatory barriers to allow entry of new competitors, the marketing implications can be
dramatic (Lovelock and wright, 1999:9).

It also refers to the transfer of control and responsibilities for government functions and
services to the private sector- private voluntary organizations or private enterprises (ECA,
2003: 23).

Privatization in Africa has taken several forms. According to Hope (2002 cited in ECA
2003: 23-24), privatization includes the following:
- Commercializing of government services which are contracted out to an outside
agency;
- Joint ventures between government agencies, ministries, and private entities;
- Sale of some government services or functions, such as water supply or
telecommunications, to the private sector;
- Management contracts for the private sector to manage specific government assets
that are used to provide public services; and
- Granting of concessions to private entities to operate and finance public
services

Privatization programs are an important vehicle for attracting additional domestic and
foreign investment flows. One reason is that privatization acts as a signal of government
commitment to the private sector. That is, in parallel with privatization programs,
governments often embark on simultaneous macroeconomic and structural adjustment
reforms - such as reducing the fiscal deficit and generally cutting back the extent of
government intervention in the economy - that improve the country’s investment climate

30
and increase the credibility of government efforts to encourage private sector
development (Bouton and Sumlinski, 1996).

Privatization is not an end in itself, but it is a key tool for improving the efficient
allocation of resources, for stimulating private sector development, and for mobilizing
investment. Privatization does this because it:

o Brings in to the open inefficiency of state run business

o Makes investment opportunities available
o Highlights the need and becomes the catalyst for capital market
development and
o Contributes towards openness by forcing government with the public.

With new investment in many of the privatized enterprises, it has been seen improved
performance, expansion and new jobs being created. This is so because privatization
focuses on poor resource allocation, inefficiencies, and weak corporate governance. It can
also bring:
 The investment that is needed in new technology, people and marketing
 Better value products and services which benefit local consumers
 Better working conditions and pay, and in the long term
 More sustainable employment (World Bank,1997:13)

2.14 Contracting Out

"Contracting out" refers to the out-sourcing or buying in of goods and services from
external sources instead of providing such services in-house (Walsh, 1995 cited in ECA,
2003:24). It is a method of privatization that is increasing in popularity due to the
emphasis on efficiency and service delivery. Contracting may be between a public
organization and a private-sector firm or between one public organization and another.
The responsibility of the public organization is to specify what is wanted and let the
private or voluntary sector provide it. More over, private contractors can be penalized for
poor quality, delays and lack of reliability (ECA, 2003: 24).

31
 2.15 Civil Service Reform

Within the wider context of administrative reform in Africa, the reform of public
bureaucracies is central to the modernization of public service delivery. In Africa,
governance is largely typified by expansion, patronage, and authoritarian rule.
Bureaucratic rationality is also compromised by the high degree of centralization in
decision making within the political executive (Bratton and Van de Walle, 1997:249).
However, by the end of the 1980s, a new breed of civil servant began to emerge within a
changing political context that included greater demands for public sector efficiency,
institutional capacity and wider democratization. Therefore, with a view to realize
comprehensive ‘state transformation’ and ‘total system overhaul’ and in line with
recommendations forwarded by the world bank many African countries have embarked
on multiple public administration reforms in the late 1980s and early 1990s of which civil
service reform program is one.(Weubamlak,2007: 2)

Governance and Social Development Resources Centre (GSDRC) defines civil service
and civil service reform as: “The civil service is a sub-set of the public service. It is the
core, permanent and administrative arm of government and comprises permanent and
pensionable officials employed in civil capacity working in government ministries,
departments and agencies.”
“Civil service reform refers to interventions that affect the organization, performance and
working conditions of employees paid from central, provincial, or state government
budgets.”

According to GSDRC one or more of the following factors has generally driven civil
service reform programmes:
 Fiscal concerns arising from overstaffing and unsustainable wage bills
 The need to facilitate policy agility and ensure that legitimate policies
can be implemented
 The need to improve service quality and operational efficiency.

32
The objectives of civil service reform are:
 Improved service delivery
 Reducing role of Government
 Reduce operating costs
 Enhancing private sector growth. /Available at:
http//www.fijichris.gov.fi/docs/82.pdf. Accessed on 06 June 2009/

The purpose of civil service reform is to improve the effectiveness and performance of
the civil service and to ensure its affordability and sustainability overtime. The ultimate
goal is to raise the quality of public services delivered to the population and to enhance
the capacity to carry out core government functions. This is essential to promote
sustained economic and social development. (Wescott, 1999: 145).

2.16 Rationale for Civil Service Reform in Ethiopia

Spanning over a decade, Ethiopia’s transformation agenda has evolved over three phases
(1992, 1996-2000 and 2001 onwards) in response to a growing awareness that pervasive
deficits in capacity have hampered the ability of the state to secure the fundamentals of
poverty reduction and democratic development including responsive service delivery,
citizen empowerment, and good governance (Ministry of Capacity Building 2004 cited in
Getachew and Common 2006:6). However, the first reform phase in the early days of
EPRDF rule was politically motivated by aiming to root out an entrenched but ‘articulate
section of the national elite’ that remained from the Dergue regime (Clapham 1995
cited in Getachew and Common 2006:6). Following the consolidation of
power, the Government also acknowledged the deep institutional constraints on basic
functions such as policymaking, service delivery, and regulation. Core public
management systems at the federal and regional levels were hampered by outdated
civil service legislation and working systems; the absence of a medium-term planning
and budgeting framework; ineffective financial and personnel management controls;
inadequate civil service wages and inappropriate grading systems; poor capacity for
strategic and cabinet-level decision- making and insufficient focus on modern managerial
approaches to service delivery.
4
Civil Service Reform. Available at: http//www.fijichris.gov.fi/docs/82.pdf. Accessed on 06 June 2009/

33
Hence, the Ethiopian Civil Service was fraught with problems that impeded the
realization of expected outcomes. These included:
- Inefficiency and ineffectiveness,
- Discretionary interventions,
-Prevalence of political clientelism,
-The taking effect of individual and group interests to the detriment of established
-rules and procedures (Weubamlak, 2007:8).

Such malpractices militated against the smooth functioning of the Civil Service thereby
reducing its competence to gear development endeavors in the desired direction and
incapacitated its potential to serve as a locus for realizing socio-economic progress.
Growing public demands arising from exposure to aspects of modern life, increased
awareness with regard to citizen entitlement and rights, and the quest for equal
opportunities to access political and material resources and amenities, among others,
necessitated making the relevant adjustments with regard to the undertakings of the
public sector. Besides, the subsiding of traditional values and norms in the face of
advancements, driven by the expansion of modern education, adoption of new life styles
and consumption patterns, etc, presented new challenges to be reckoned with. Failure to
adhere to established rules, unwarranted political interference affecting standard
administrative procedures, and emphasizing political loyalty as the major criterion for
appointments and promotions.

In recognition of these constraints, the Government embarked on a comprehensive Civil

Service Reform Program (CSRP) in 1996, making the second reform phase. Indicative of
Ethiopia’s "first generation" capacity building efforts, the CSRP sought to build a fair,
transparent, efficient, effective, and ethical civil service primarily by creating enabling
legislation, developing operating systems, and training staff in five key areas: (i)
Expenditure Control and Management, (ii) Human resource Management, (iii) Service
Delivery, (iv) Top Management Systems, and (v) ethics. Successful efforts (for example,
budgeting, planning, and accounting reforms) at the federal level were intended to
provide prototypes of regional authorities. The CSRP was also influenced by the
international New Public Management trend, and reforms in New Zealand in particular

34
(Peterson, 2001 cited in Weubamlak, 2007:9). The CSRP also faced some delays due to
the Ethio-Eritrea border conflict 1998-2000. However, some achievements which may
pave the way for full implementation of the CSRP were witnessed. Among other things,
the development of new legislation ( for example, a financial management proclamation,
a civil service law, a code of ethics, complaints-handling procedures, and a service
delivery policy) as well as operating systems for budgeting, procurement, and some
aspects of personnel management such as salary surveys and records management.

The most recent reform phase began in September 2001, with the launch of the Public
Sector Capacity Building Support Program (PSCAP), which also revived the CSRP. The
Government has moved quickly to prepare the CSRP for its "full implementation"
across all regions and levels of government. Pilot studies and special programs on
performance and service delivery improvements in selected Ministries, Agencies, and
Bureaus have been initiated. These include; the establishment of focal points responsible
for reform implementation across tiers of government; a series of workshops undertaken
to sensitize the political leadership and civil servants across the country; and the launch of
a "special program" of Performance and Service Delivery Improvement Policy (PSIP)
in priority Ministries, Agencies, and Bureaus designed to deepen the
implementation of performance management. PSIP, along with other reform
programme areas, have promoted Business Process Reengineering (BPR) as a key
management initiative, particularly in those ministries that interface directly with the
private sector.

However, recently the perception is that the CSRP in general is losing momentum, and
following an appraisal of PSCAP, the following challenges remained including
inefficiencies derived from poor financial management, poor incentives and a lack of
strategic or performance orientation across all levels of government (Watson 2005 cited
in Weubamlak 2007:10). Therefore, in the light of the CSRP and other reform programs
included in the package of Strategic Adjustment Program, the Ministry of Capacity
Building reformulated the following objectives for the CSRP in June 2003:

-To shake off basic weaknesses ingrained in the existing Civil Service
inherited from the past regime

35
 -To build the capacity of the Civil Service so that it will execute the policies and
programs of the government successfully
-To facilitate the Civil Service to provide efficient and fair services to the public
-To enhance transparency and accountability in the Civil Service
-To build a Civil Service that stands for gender and ethnic equality and rights
-To build a Civil Service that is ethically sound and free of corruption,
nepotism, and favoritism

Although these objectives enjoy broad support in the country, the challenge is whether
the government is capable of bringing about the envisaged changed in the system. There
are doubts about the environmental readiness, political commitment, and that the required
level of technical expertise is in place to institute the change. As Peterson (2001: 138)
notes:
Ethiopia’s CSR is an ambitious programme that would tax the capabilities of any
developed or developing government. The strategy document of the reform is an
impressive blueprint for broad transformation. Whether the reform is too ambitious
depends on how implementation is required.

Institutional capacity, particularly in relation to human resource development, remains a

major obstacle to reform in Ethiopia (Mengistu and Vogel 2006 cited in Weubamlak
2007:11). According to Gebriel (2002), of the 300,000-plus civil servants, less than 17%
held a college diploma and the majority of these were concentrated in major cities such as
Addis Ababa. The creation of an enabling environment for the reform is one of the main
demanding tasks of acquiring the resources to build the technical capabilities and to
develop human resources. As in the case of most African countries, a consortium of
donors, coordinated by the World Bank, have extended loans to finance the PSCAP,
having the following objectives:
-To improve the scale, efficiency, and responsiveness of public service
delivery at the Federal, regional, and local level
-Empower citizens to participate more effectively in shaping their
own development

36
 -Promote good governance and accountability (Ministry of Capacity Building,
2004: 8)

Clearly to attain these objectives requires changes in bureaucratic values. As Mengistu

and Vogel (2006: 209) observe, 'the current lack of capacity presents a severe,
fundamental governance challenge for Ethiopia.' However, reforms are sweeping through
public administration in Ethiopia, as the study demonstrates.

2.17 Service Quality

Managing service quality is a major part of service marketing. Providing services that
consistently meet or exceed customers' expectations is a key to overcoming most of the
major problems unique to services.

Researches and company experiences indicate that delivering high service quality
produces measurable benefits in profit, cost savings, and market share.

According to Berry et al (1989 cited in Mohanty and Lakhe 2002: 49) service quality is
defined as the ‘conformance of services to customer specifications’.

Quality assurance is the process of providing confidence that the stated or implied
requirements for quality are met. In investment services, “quality” is defined as the
perception of the investor about achieving satisfactory returns under acceptable and
generally accepted risks within a planned time (Al-nsour et al, 2008: 1-2). Investor’s
confidence in achieving quality stems from the quality assurance efforts and process of
the investment service provider, therefore it is important to examine whether and how
quality of services delivered to investors affects investment.

2.17.1 Gap Analysis

Business reference, the encyclopedia of management defines gap analysis as the activity
of studying the difference between standards and the delivery of those standards.

37
From a service quality perspective there are several gaps that are important to measure.
These include:
1. Service quality gap: Indicates the difference between the service expected by
customers and the service they actually receive
2. Management understanding gap: represents the difference between the quality
level expected by customers and the perception of those expectations by
management
3. Service design gap : this is the gap between managements perception of customer
expectations and the development of this perception in to delivery standards
4. Service delivery gap: represents the gap between the established delivery
standards and actual service delivered
5. Communication gap: This is the gap between what is communicated to consumers
and what is actually delivered

The main reason for the importance of gap analysis is that it is used as a tool to narrow
the gap between perceptions and reality, thus enhancing customer satisfaction.

2.17.2 Dimension of Service Quality

Berry et al, as cited by Mohanty and Lakhe (2002:49) have identified the principal
dimensions customers use to judge service quality. These are:

Reliability: ability to perform the promised service dependably and accurately.

This means that customers expect companies to deliver the promised level of
service each time and every time dependably and accurately. Consistency is
therefore the most important factor in service quality;
Responsiveness: willingness to help customers and provide prompt service. It
means, the service should be delivered promptly and the company should respond
to the customer's demands;
Assurance: employees' knowledge and courtesy and their ability to inspire
trust and confidence, i.e. the service employees should be knowledgeable,
courteous and able to convey trust and confidence;

38
 Empathy: the customer should be provided caring and individualized attention;
and
Tangibility: appearance of physical facilities, equipment, personnel, and
written materials (Mohanty and Lakhe, 2003; 49-50).

2.17.3 Five Factors of Service Quality

Sueshchandar et al (2002: 12) identify five factors of service quality as critical from a
customer point of view. The details of the critical factors are presented in table 2.1 as
follows.

Table 2.1 the critical factors of customer-perceived service quality

SI.no. Critical factors Explanation of the critical factors

1 Core service or service product The core service portrays the “content” of a service. It portrays
the “what” of a service, i.e. the service product is whatever
features that are offered in a service
2 Human element of service delivery This factor refers to all aspects (reliability, responsiveness,
assurance, empathy, moments of truth, critical incident and
recovery) that will fall under the domain of the human element
in the service delivery
3 Systematization of service delivery: The process, procedures, systems and technology that would
non-human element make a service a seamless one. Customers would always like
and expect the service delivery processes to be perfectly
standardized, streamlined, and simplified so that they could
receive the service without any hassles, hiccups or
undesired/inordinate questioning by the service providers
4 Tangible of service-servicescapes The tangible facets of the service facility (equipment,
machinery, signage, employee appearance, etc) or the man-made
physical environment, popularly known as the “servicescapes”
5 Social responsibility Social responsibility helps an organization to lead as a corporate
citizen in encouraging ethical behaviour in everything it does.
These subtle, but nevertheless forceful, elements send strong
signal towards improving the organization’s image and goodwill
and consequently influence the customers’ overall evaluation of
service quality and their loyalty to the organization

Source: Sueshchandar et al (2002: 12). The relationship between service quality and
customer satisfaction – a factor specific approach

39
 2.18 Conclusion

This chapter explains various theoretical perspectives of public service

delivery specifically related to investment. Basically the effectiveness of
investment relies on establishing attractive business environment and delivering fast
and quality service. Long queues, poor service delivery and insufficient physical
facilities affect the image and level of service quality in the public sector in general
and in investment service delivery in particular. Thus, it is important to evaluate
service delivery in terms of the principles of quality service as well as the
dimensions of service quality. Service quality that customers received must be
tangible, reliable, responsive and emphatic.

Moreover, understanding the characteristics of services is one of the basic things

to provide quality service. Services have a number of distinctive characteristics which
differentiate them from goods and have implications for the manner in which they are
marketed. These characteristics are often described as intangibility, inseparability,
variability and perishability.
Therefore, service organizations should consider the above mentioned concepts to
provide quality service and to satisfy their customers. Service quality and customer
satisfaction are inarguably the two core concepts that are at the crux of the
marketing theory and practice. In today’s world of intense competition, the key
to sustainable competitive advantage lies in delivering high quality service that will in
turn result in satisfied customers.
However, the delivery of service in the public sector was characterized by slow,
burdensome, bureaucratic, and corruptive which have a direct negative impact on
customer satisfaction and economic growth. To fix these problems Public Sector
Reform (PSR) were designed, most of which are flourished by New Public
Management (NPM). Public sector reform is a deliberate and planned effort to
introduce useful changes in the structure and process of public organization with the
aim of bringing about efficiency, effectiveness, transparency, and openness in service
delivery.

40
 New public management is said to be inspiring many (but not all) reforms around
the world making citizens in developing countries aware of improved public service
due to knowledge transfer.

The underlining essence of NPM is that of transferring some important insights

and values from the private sector to the public arena, values like efficiency,
effectiveness, flexibility, responsiveness, competition, result oriented management,
more explicit and measurable performance standards, more active control
based on present output indicators, accountability etc. should improve customer-
oriented services. Besides, NPM has its own causes, doctrines, principles and
elements.

Like in other areas of the world public sector reform in developing countries in
general and in sub-Saharan Africa (SSA) in particular has been evolving over
time. These countries have generally experienced three waves of reforms: in 1980s
Structural Reform Wave, in 1990s Capacity Building Wave and in 2000 Service
Improvement Wave.

Public sector reforms may take various forms, such as restructuring without changing
the ownership, privatization, public private partnership, out sourcing, etc. Thus, PSR
is important for institutionalizing a competent, efficient and accountable system
of governance that offers an enabling environment for private investors.

Generally, for the delivery of quality service and customer satisfaction, the
introduction of public sector reform focusing on useful changes in the structure and
process of public organization with the aim of bringing about efficiency, effectiveness,
transparency and openness in service delivery is crucial. Most of the public sector
reforms are flourished by New Public Management. NPM stems from the belief that
mistakes can be avoided, defects can be prevented and waste can be eliminated. It aims
to continuously improve results, in all aspects of works, through the continuous
improvement of capabilities

41
 CHAPTER THREE
WORK SCHEDULE AND BUDGET BREAHDOWNS
3.1 Activity Plan
Table 3.1 Time schedule for research work
No. Activities Time frame work Remark
1 Submission of the title Up to Sep.10/21
2 Identifying senior essay to Advisor Up to Sep.15/21
3 Project proposal preparation Sep-25/21
4 Submission project proposal Oct 9/21
5 Preparation of questionnaires Oct.10-15/21
6 Field work and Data Collection Oct.15-25/21
7 Data analysis and final draft submission Oct.25-30/21
8 Finalizing and submitting papers to the departement Nov 1-10/21

Source/self sponsored / covered by researcher

42
3.2 Budget Plan

Table 3.2 Budget schedule or cost break down of the study

Number List of items Measure Amount Unit price Total

ments price(Br)
1 Paper Packet 2 250 500

2 Pen (Lexi) No. 10 10 100

3 Telephone card No. 8 50 400
4 Pencil No. 2 5 10
5 8GB flash No. 1 350 200
6 writing & printing of research 102 10 1020
questionnaires Page
7 Photocopy for questionnaires Page 20 2 20
8 Writing & printing the paper Page 80 5.00 400
9 Transport cost Trip 20 30 600
10 Allowance Days 20 100 2000
11 Contingence (10% of the total)
Total budget needed 5250
soure

43
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47
 Appendix

QUESTIONNAIRE

GAGE UNIVERSITY COLLEGE, COLLEGE OF OPEN AND DISTANCE LEARNING.

QUESTIONNAIRE TO SERVICE DELIVERY AND CUSTOMER SATISFACTION IN
THE PUBLIC SECTOR THE CASE OF ADDIS ABABA INVESTMENT AGENCY

Dear respondents

We are BA student in Gage University College and We are conducting a Survey on service
delivery and customer satisfaction in the public sector the case of Addis Ababa Investment
agency. There for, the purpose of this questioner is to gather data for this study and your
cooperation and ingness in giving the reliable information is very important. This Survey is
a part of our Degree Dissertation and your kind co- operation is essential for my successful
completion of this Research. We would like to thank you in advance for your participation
and sharing your busy schedule. Please do not hesitate to ask or to call/mail if you have any
doubt on the questions.
Rahel Berhanu
Ruhama Zeleke
Tadese Getachew
Sewnet Biresaw
Shume Bekele
M ob. +251912385482
+251970385268

Instruction
s

No need of writing your name

Giving more than one response is allowed, if necessary.

For multiple choice questions and Likers scale type statements indicate your answers with a tick
mark (√) in the appropriate blank space.

Note: kindly put a (√) mark with the option that reflects your level of agreement with the
given
statement
.
48
49
Part One :

BASIC DEMOGRAPHIC DATA (PLEASE PUT “ √ ” IN SIDE THE BOX)

1. Age : a 18-25 b 26-30 c 31-35 d 36-40 e>41

2. Sex: a Male b Female

3. Educational level of respondents : a. Secondary education

b. College Diploma c. First Degree d. Postgraduate Degree

4. Marital status : a. Married b. Single c. Divorced d. Widowed

Part two
The following set of statements describes your general feelings towards service
delivery and customer satisfaction in the public sector the case of Addis Ababa
Investment agency
1 . Convenience of office location
Yes No
2. Comfortablity of the reception area

Very good Good Bad Very bad

3. Information access
Very good Good Bad Very bad

4. Employees view on fulfillment of manpower and comfortable office with necessary

facilities

Fulfilled Partially fulfilled Not fulfilled

5. Employees’ view on the provision of skill based trainings and incentives

High Medium Low Not at all

6 Requirements/ preconditions to be fulfilled by the customer

50
Very many many fair few Very few

51