I am a true believer of the following statements:
- That government employee’s work for less than what they could earn in the private sector.
- That our best public sector employees should be compensated with the best paychecks.
- That pay-for-performance is a great concept that should be applied as an incentive to encourage great workplace performance.
- And, that pay-for-performance should not be part of government pay plans. Today.
I actually do not think that pay-for-performance should be instituted in US government agencies today and in fact, get a little scared whenever I see them. The reason is because the only way a pay-for-performance plan can be successful is if performance is well-defined. What does well-defined performance mean? In my world, it means a set of metrics that are objective (i.e. not related to how your boss feels that you are doing), are clearly stated up front (everyone knows exactly what they held accountable for), and that tie to strategic outcomes outlined in the agency’s mandate or mission.
There are only a few private sector companies (even fewer government agencies) that can demonstrate these performance requirements sufficiently to tie them to compensation. Oh yes, even the private sector struggles here. It is true that some industries are a natural for this type of compensation scheme, sales being the perfect example. You sell more, you get paid more. But for most other private sector companies, it is a struggle to put the right metrics in place. Yet though I’ve seen few companies have good solid outcome metrics, I continue to see many more insist on implementing pay-for-performance anyways…government being one of them. It is almost as if the rationale is: if we put the compensation plan in place the metrics will follow..!?!?!?
What happens next in this cart-before-the-horse scenario is confusion, disengagement, nasty legal issues, and just bad feelings when performance is subjectively determined and ties to nothing of strategic value. In fact, it seems to me that these compensations systems do greater damage than good when they don’t have the metrics to support them.
To be clear, while I think the idea is a great one, it can only be used once the well-defined metrics are in place. Would love to hear if anyone has examples of where a pay-for-performance system has worked positively in the government (or even the private sector). It would be great to highlight some best practice work.