Economic crisis & budget cuts in Latvia

Latvia is currently probably one of the well known countries in Europe because of the economic situation. Before a year, when I stated my country-of-origin is Latvia in the Benelux, a lot of the people thought it’s Lithuania, or didn’t know where/what it is. Now the knowledge of the public has improved, asked the same question the typical reply is “Latvia? Oh, that one. Its on the news all the time”. This is partly a good thing, because it’s said there is no bad publicity. It’s just publicity.

The bad thing is how ministries/other government structures of Latvia are doing the so-much-needed budget cuts. There should be a structural reform being made (that’s what’s being requested by the international loan-givers). What happens actually is quantitative modifications of the budget by releasing a proportional amount of people/lowering analysis without any/little analysis.

The first question a good government manager should ask facing a significant budget cut is – what functions in my responsibility are critical for the mission statement.  That would mean evaluating the need of the departments and getting rid of the ones which are not critical for the primary functions of the institution (vertical cuts). There is certainly a cut to make in that area for Latvia where entire departments were created without a real need, just for relatives/friends to have a good paid work. Or high-ranking staff people returning from foreign diplomatic missions and having no according rank position – ok, lets just create a department you can manage.

What most of the Latvian goverment institutions are doing is horizontal cuts. We need to lower our expenses by 30%? No problemo, lets cut all departments by 30% (well an oversimplification, but that’s happening).

I see this time of mandatory budget cuts as a good way for the ministries to get rid of the spider webs in their human resources. There are people/departments who don’t perform but stay in the ministry because of their impressive web. Now they have at least the formal reason to get rid of those elements, and its just about the will to clean. Lets see if that chance is used.

Good weekend everybody, and lets hear some more apologies from the goverment next week 😉

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