The purpose of this study is to analyze the effect of public institution relocation on the business efficiency and performance of public institutions. The relocation of public institutions is a representative national policy pursued to eliminate the i...
The purpose of this study is to analyze the effect of public institution relocation on the business efficiency and performance of public institutions. The relocation of public institutions is a representative national policy pursued to eliminate the imbalance between metropolitan and non-metropolitan areas and to promote balanced national development. Despite the positive proposition of equity, it is also frequently pointed out that the relocation of public institutions has side effects that lead to the inefficiency of public businesses. Therefore, the purpose of this study is to verify whether the relocation of public institutions has had unintended side effects by examining the effect of relocation on business efficiency and performance of public institutions through objective data.
In this study, panel regression analysis using a fixed effect model was performed for public enterprises and quasi-government institutions that maintained public institution designation throughout the period from 2013 to 2017. A total of 109 public institutions(30 public enterprises, 79 quasi-government institutions) were analyzed, of which 60 were transferred and 49 were not.
In this study, the scope of the analysis of business efficiency is limited to the efficiency of administrative management to verify the costs incurred in terms of communication management and human resource management, which are most frequently mentioned as adverse effects of the relocation of public institutions. Business trip cost and number of business trips were established as measures of communication cost, and the voluntary retirement rate was set as a measure of human resource management. The performance of public institutions is divided into two aspects: profitability and publicness. We set labor productivity and return on assets(ROA) as indicators of profitability, and the major business performance score of public institution management evaluation and customer satisfaction survey score as indicators of publicness.
The results of the study are as follows. First, when public institutions moved to the provinces, business trip cost, number of trips, and voluntary retirement rate increased, compared with cases in which institutions did not relocate. This suggests that local relocation causes inefficiency in terms of the communication cost of personnel management of public institutions.
Second, as a result of examining the effect of local transfer on the performance of public institutions, it can be seen that, in terms of profitability, at the 5% significance level, labor productivity was not significantly influenced by transfer to the provinces, but at the 10% significance level, relocation led to a decrease in labor productivity. In terms of ROA, it was not possible to confirm the effect of the relocation.
In terms of publicness, local transfers decreased the major business performance score of management evaluation and the score of the customer satisfaction survey at the 5% significance level.
In addition, in this study, interviews were conducted with employees(two public institutions, a total of seven persons) responsible for personnel affairs and performance evaluation tasks of public institutions to analyze and supplement panel analysis results. Similar results were obtained with the analysis results. And, according to the interviews, as business travel increases, it may cause additional costs of business operation and management as it creates vacancies in work in addition to travel expenses of the organization. In the case of moving to a small city, it was mentioned that there can be difficulty recruiting professional staff. In terms of the performance of public agencies, it was found that there could be deviation according to the characteristics of public institutions such as whether there are subordinate organizations other than the head office that directly perform tasks, or whether they are the institutions directly providing the public services.
This study is meaningful in that it provides the objective evidence that can actually verify the inefficiency and performance degradation that have been raised in relation to relocation. As a result of this research, an increase in business trips and the retirement rate, frequently pointed out as inefficiency factors of the relocation of public institutions, are confirmed, along with some negative effects on the performance of public institutions such as customer satisfaction surveys. For the successful settlement and development of relocated public agencies, it is necessary to make a continuous effort to minimize possible side effects by activating alternative communication methods such as video conferencing, creating countermeasures to ensure efficiency of human resources management, and expanding web-sites and service-call centers to complement the weakening of customer accessibility.