PAY FOR PERFORMANCEPAY FOR PERFORMANCEGROUP 1GROUP 1

by Chitral Amarasiri, Sri Lankaby Chitral Amarasiri, Sri Lanka

1313thth International Symposium - International Symposium - Public Personnel ManagementPublic Personnel Management

Budapest Marriott Hotel, Budapest Marriott Hotel, May 15- 19, 2005May 15- 19, 2005

GROUP 1GROUP 1

BahrainBahrain - Ahemed A Al-Bahar- Ahemed A Al-Bahar (Team Leader)(Team Leader)

GermanyGermany - Ingrid Barb-Priebe- Ingrid Barb-PriebeMaltaMalta - Joseph Izzo - Joseph Izzo South AfricaSouth Africa - Odette Ramsingh- Odette Ramsingh Sri LankaSri Lanka - Chitral Amarasiri- Chitral Amarasiri TaiwanTaiwan - Ruey-Hong Chang- Ruey-Hong Chang Trinidad & TobagoTrinidad & Tobago - Earl Blugh- Earl Blugh World Bank World Bank - John Lavelle - John Lavelle United StatesUnited States - Lynda S Von Bargen - Lynda S Von Bargen

- Neil Reichenberg- Neil Reichenberg

ContentContent

Objective of the session/ Objective of the session/ PresentationPresentation

Current StatusCurrent Status

Obstacles & BarriersObstacles & Barriers

Performance Appraisal systemPerformance Appraisal system

Non-Financial BenefitsNon-Financial Benefits

Rewards structure Rewards structure

OBJECTIVEOBJECTIVE

To understand country specific To understand country specific “Pay for Performance” (PFP) “Pay for Performance” (PFP) systems in brief and to share systems in brief and to share

knowledge on selected specific knowledge on selected specific areas.areas.

Current Status of PFP - Current Status of PFP - BahrainBahrain

Grade and Step System Grade and Step System – Executive, Executive, – Professionals, Professionals, – Judges, Judges, – Regular,Regular,– TeachersTeachers

Annual Increment Annual Increment – Blanket cover – fixed incrementBlanket cover – fixed increment– Based on cost of living Based on cost of living

Introduced a Pay for performance scheme Introduced a Pay for performance scheme and it was not successful at the 1and it was not successful at the 1stst attempt attempt

Current Status of PFP - Current Status of PFP - GermanyGermany

Grade and Step System Grade and Step System – Very structured systemVery structured system–

Annual Increment Annual Increment – Blanket cover – fixed incrementBlanket cover – fixed increment

No Bonus Scheme or PFP in operationNo Bonus Scheme or PFP in operation

Current Status of PFP – Current Status of PFP – MaltaMalta Grade and Step System Grade and Step System

– In operation since 1990In operation since 1990– 4 sectors (A, B, C, D) and altogether 20 4 sectors (A, B, C, D) and altogether 20

classificationsclassifications– A sector salary is 4 times of the D grade salaryA sector salary is 4 times of the D grade salary– One grade to another through an examinationOne grade to another through an examination

Annual Increment Annual Increment – A sector no incrementA sector no increment– B,C,D sector – blanket cover fixed incrementB,C,D sector – blanket cover fixed increment

Bonus Scheme or PFP in operationBonus Scheme or PFP in operation– A sector static Salary + PFP BonusA sector static Salary + PFP Bonus– BCD sector Salary + increment no BonusBCD sector Salary + increment no Bonus

Current Status of PFP – Current Status of PFP – South AfricaSouth Africa Grade and Step System Grade and Step System

– Equate levels 1 -12 (Structured)Equate levels 1 -12 (Structured)– Levels 13 – 16 Levels 13 – 16 (Structured but based on individual need)(Structured but based on individual need)

Annual Increment Annual Increment – Increments are based COLIncrements are based COL– Union Negotiate increment once in three yearsUnion Negotiate increment once in three years– Snr. Management – by the ministrySnr. Management – by the ministry

Bonus Scheme or PFP in operationBonus Scheme or PFP in operation– PFP based Cash Bonus for levels 13 to 16PFP based Cash Bonus for levels 13 to 16– Merit awards for levels 1 to 12Merit awards for levels 1 to 12– Birthday BonusBirthday Bonus

Current Status of PFP – Current Status of PFP – Com Bank Sri LankaCom Bank Sri Lanka

Grade and Step System Grade and Step System – 5 Grades and 12 classifications5 Grades and 12 classifications– Promotions – Non-Executive to Executive by an ExamPromotions – Non-Executive to Executive by an Exam– Other Promotions based on performanceOther Promotions based on performance– Many perks tag with the gradeMany perks tag with the grade– Performance StandardizationPerformance Standardization

Annual Increment Annual Increment – Non Executives : Union negotiate increment for three years Non Executives : Union negotiate increment for three years – Executive staff : increment on performance only Executive staff : increment on performance only – Major salary anomaly issueMajor salary anomaly issue

Bonus Scheme or PFP in operationBonus Scheme or PFP in operation– Executives 4 grades – PFP Bonus + Holiday allowanceExecutives 4 grades – PFP Bonus + Holiday allowance– Others categories of employees – No bonusOthers categories of employees – No bonus

Current Status of PFP – Current Status of PFP – TaiwanTaiwan Grade and Step System Grade and Step System

– Commence 40 years agoCommence 40 years ago– 14 Grades with different classifications14 Grades with different classifications– Promotions are based on seniorityPromotions are based on seniority– Strategically driven – cascaded to agenciesStrategically driven – cascaded to agencies– Agency level performance committeesAgency level performance committees– No negotiationsNo negotiations

Annual Increment Annual Increment – Fixed Increment Fixed Increment

Bonus Scheme or PFP in operationBonus Scheme or PFP in operation– 3 years ago PFP Bonus scheme commenced3 years ago PFP Bonus scheme commenced– Professional merit awards, cash rewards (CEO, Professional merit awards, cash rewards (CEO,

Units:80%, Individual:20%) Units:80%, Individual:20%)

Current Status of PFP – Current Status of PFP – Trinidad Trinidad Grade and Step System Grade and Step System

– Job classification and point based system in placeJob classification and point based system in place– Snr MGT, Judicial, legal officers determined by the SRC, Snr MGT, Judicial, legal officers determined by the SRC,

Judicial and legal salaries based on guide chart method of job Judicial and legal salaries based on guide chart method of job evaluationevaluation

– Snr. Management : flat scale salary ratesSnr. Management : flat scale salary rates– Salary structures for teachers, police, fire and prison services Salary structures for teachers, police, fire and prison services

are based on negotiations by unions + guide chart method. are based on negotiations by unions + guide chart method. – 64 salary grades in the civil service and salary rates are based 64 salary grades in the civil service and salary rates are based

on position classification method of Job Evaluation.on position classification method of Job Evaluation.– Professional, technical staff salaried below the mkt rate + Professional, technical staff salaried below the mkt rate +

special allowancesspecial allowances

Annual Increment Annual Increment – Based on satisfactory performancesBased on satisfactory performances

Bonus Scheme or PFP in operationBonus Scheme or PFP in operation– No PFP Bonus schemeNo PFP Bonus scheme

Current Status of PFP – Current Status of PFP – World Bank World Bank

Grade - Hay System Grade - Hay System – Job classification grades Job classification grades – Salaries are adjusted as per the Market rate Salaries are adjusted as per the Market rate

comparison with selected international comparison with selected international agencies.agencies.

Annual Increment Annual Increment – Based on performances rating MatrixBased on performances rating Matrix

Bonus Scheme or PFP in operationBonus Scheme or PFP in operation– No PFP Bonus schemeNo PFP Bonus scheme

Current Status of PFP –Current Status of PFP – Montgomery College Montgomery College

Grade System Grade System – Job classification grades Job classification grades – Snr. Management, Staff (14 grades), FacultySnr. Management, Staff (14 grades), Faculty– Negotiation process for staff/faculty categories Negotiation process for staff/faculty categories

Annual Increment Annual Increment – Snr Mgt : performance based incrementSnr Mgt : performance based increment– Staff : COL adjustment + Merit performanceStaff : COL adjustment + Merit performance– Faculty: one scale, COL + Merit performanceFaculty: one scale, COL + Merit performance

Bonus Scheme or PFP in operationBonus Scheme or PFP in operation– No PFP Bonus schemeNo PFP Bonus scheme

Obstacles and BarriersObstacles and Barriers Issues pertaining to subjectivityIssues pertaining to subjectivityApplicabilityApplicabilityFunding issue Funding issue Right awareness : training issuesRight awareness : training issues– Knowledge of supervisors & Job incumbentKnowledge of supervisors & Job incumbent

Cultural & Communication issuesCultural & Communication issues– Consider the interest of various stakeholdersConsider the interest of various stakeholders

Legislation issues – parliament, etcLegislation issues – parliament, etcSome are not keen, since they feel that PFP in the Some are not keen, since they feel that PFP in the

public sector will be more a de-motivatorpublic sector will be more a de-motivator

Performance Mgt. SystemPerformance Mgt. SystemConsidered as a powerful management tool Considered as a powerful management tool – Strategically driven – Long/Medium term, cascadedStrategically driven – Long/Medium term, cascaded– Planning & implementing – KPIs/KRAs, clear measures, Planning & implementing – KPIs/KRAs, clear measures, – employee feedback, industrial relation, employee feedback, industrial relation, – training and development, training and development, – succession planning, etcsuccession planning, etc

Success depends on; Success depends on; – System (Process), Simplicity (Format), Supervisors,System (Process), Simplicity (Format), Supervisors,– Training : Mandatory, but many create the need, structured Tra.Training : Mandatory, but many create the need, structured Tra.

Can we abandoned the Performance appraisal Can we abandoned the Performance appraisal system in the public sector?system in the public sector?– Credibility is an question, Does it serve the purpose? Credibility is an question, Does it serve the purpose? – Is it a grievance handling mechanismIs it a grievance handling mechanism– Is it waste of executive time and paper?Is it waste of executive time and paper?– With technology world is changing is this out dated?With technology world is changing is this out dated?– More a employee de-motivator than a motivatorMore a employee de-motivator than a motivator– Is it too clinical? Assigning 4.99 or 5.00 to a human outputIs it too clinical? Assigning 4.99 or 5.00 to a human output– Is too democratic and too transparent?Is too democratic and too transparent?

Non financial benefitsNon financial benefitsShould not link with the PFP system Should not link with the PFP system (entitlement mentality) and it should be (entitlement mentality) and it should be at the discretion of the direct at the discretion of the direct manager.manager.Recent survey in USA has revealed Recent survey in USA has revealed that people value leisure time than that people value leisure time than money, thus now companies give a money, thus now companies give a day-off as a benefit.day-off as a benefit.Training, Sabbatical, long years of Training, Sabbatical, long years of awards, appreciations awards, etc.awards, appreciations awards, etc.

Today’s Challenges Today’s Challenges

Characterized by uncertainty and challengeCharacterized by uncertainty and challenge Customer/Beneficiary is more sensitive than beforeCustomer/Beneficiary is more sensitive than before Funding are under pressureFunding are under pressure Increasing role of technologyIncreasing role of technology Creation of a new type of workforceCreation of a new type of workforce Leaner and flatter structureLeaner and flatter structure Attracting and retaining talentAttracting and retaining talent Shift from seniority to performanceShift from seniority to performance Developing ownership and empowermentDeveloping ownership and empowerment

Pay for Performance or Pay for Performance or Performance Appraisal System Performance Appraisal System

Employees:“I don’t understand

what it takes to do well here. Success is all

about who you know.”

Managers:“I dread giving that

person feedback. I’m waiting for her to just

quit.”

HR Director:“Why are we always

cleaning up the problems? Where is the

accountability for individuals?”

Leaders:“Everybody here is

working hard - I don’t understand why we aren’t meeting our business goals.”

Affiliation

Career Value

Work Content

Indirect Financial Rewards

Direct Financial Rewards

Total RewardsTotal RewardsTotal Rewards cover everything an employee gets as a Total Rewards cover everything an employee gets as a

result of working for an organization, including all aspects result of working for an organization, including all aspects of the work environment, as well as all elements of of the work environment, as well as all elements of

compensation (remuneration and benefits).compensation (remuneration and benefits).

Total Rewards ApproachTotal Rewards Approach Reward mix decisions made in context of all Reward mix decisions made in context of all

forms of rewards: cash, benefits & work forms of rewards: cash, benefits & work environment;environment;

Remuneration is a hygiene factorRemuneration is a hygiene factor– Additional investment in remuneration will only Additional investment in remuneration will only

lead to marginal improvements in employee lead to marginal improvements in employee engagement and in turn business results; engagement and in turn business results;

– Additional investment in the work environment will Additional investment in the work environment will lead to superior improvements in engagement and lead to superior improvements in engagement and in turn lead to better business results.in turn lead to better business results.

Maximising Return on Reward Investments

Fair/Reasonable Investment

Additional Investment

Competitive Returns

Superior Returns

$ INVESTMENT

% ROI

Remuneration Investment

Work Environment Investment

Total Rewards ApproachTotal Rewards ApproachBeyond the “fair and reasonable level” Beyond the “fair and reasonable level” : Studies show that marginal ROI is significantly higher : Studies show that marginal ROI is significantly higher if you invest in building a more rewarding work environment - specifically focusing on the key if you invest in building a more rewarding work environment - specifically focusing on the key drivers of engagement.drivers of engagement.

Types of incentive pay plans Types of incentive pay plans Plan Design Objective Target

Performance Focus

Funding

Profit SharingShare in Company profits

Foster teamwork

All employeesCorporate, Business Unit

Profits

Business Incentives

Linked to Financial & Non-financial targets

Increase focus on Corporate, division, &/or indiv goals

Top & Middle Mgmt

Corporate, Business Unit, Team, Indiv

Incremental financial performance above targets

Productivity/ Gainsharing

Share in economic benefits of improved productivity

Support major productivity/ quality initiative

Plant or unit employees

Plant, Facility, Team

Savings

Types of incentive pay plans Types of incentive pay plans

Plan Design Objective TargetPerformance Focus

Funding

Team/Group Incentives

Reward achievment of team targets

Foster teamwork

Project Teams/ Groups

Team

Cost savings, budgeted amounts, increased revenues

Individual Performance Awards

Reward achievment of individual targets

Reward individual performance

Individual Individual

Cost savings, budgeted amounts, increased revenues

Thank You!Thank You!Chitral Amarasiri- Sri LankaChitral Amarasiri- Sri Lanka