March 2, 2010 at 1:29 pm #93742
I am wondering what people think about bonuses and other financial incentives based on performance in government: do they work? what impact do/can they have? why do/don’t they work? if employees in the private sector can be so successfully motivated by bonuses, can public sector workers’ performance be improved through performance related pay/bonuses etc? can motivating a few high-performing employees improve organizational performance? Any and all ideas, arguments, examples welcome.
March 2, 2010 at 1:49 pm #93772
Great question, Giles. I remember seeing a couple other discussions on GovLoop that provide some insight from other members:
Do Rewards Damage Performance? https://www.govloop.com/forum/topics/do-rewards-damage-performance
Time Off vs. Cash Bonus? https://www.govloop.com/profiles/blogs/timeoff-vs-cash-bonus
My thoughts: I am mostly motivated by pride in my work and intangibles like being to able to telework/work from anywhere along with a flexible schedule. But I also really like to have a bonus structure in place that gives me some clear targets and an incentive for meeting them both at intervals throughout the year and at at year’s end. The key for agencies is making sure the targets are really concrete and time-driven…because if it’s nebulous and open to interpretation, that opens a big ol’ can of worms!
March 2, 2010 at 2:00 pm #93770
Thanks for your reply Andrew. What do you consider to be the correct balance between time-driven, concrete, output targets (which will almost inevitably focus on your business area/function/process) and outcome targets (that will probably be more nebulous)? I ask because it seems to me that while, for example, IT and legal maybe doing their jobs brilliantly, if the organization is failing in its duty to deliver effective services to the public, then perhaps those bonuses should not be paid.
March 2, 2010 at 2:30 pm #93768
I am a pretty firm believer that any external motivation is not going to yield the results we hope to get… Mainly because it assumes that 1) Employees are holding effort back and 2) they are the problem. In other words, if employees worked better, government would improve.
I’m a bigger fan of lessoning those things in the workplace that dissatisfy employees and trying to fix the way work is done… Might sound pie in the sky – but the other way just doesn’t work
March 2, 2010 at 4:41 pm #93766
Local governments are big experimenters in this area. My neighboring city of Concord, CA, has had a pay-for-perfomance plan in place for more than a decade and is a very well-run medium-sized city. It looks like they may be modifying or suspending the plan during the current fiscal crisis, but here’s a pdf on how it works.
March 2, 2010 at 4:51 pm #93764
Thanks for the link; excellent presentation
March 2, 2010 at 9:00 pm #93762
I question the premise that performance-based pay works in the private sector:
It sounds like a reasonable idea but given the nature of modern work that is largely knowledge-based and difficult to measure (unlike a repetitive task in an assembly line) how do you insure that you are measuring real performance? Tying it to the organization’s results sounds like a good cure but then you have the task of determining who contributed what and how important was their contribution to the results. You have to have fair, transparent, and easily-verifiable measures to judge dissimilar performance. And how do you measure the time that I spent in the shower thinking of a work problem?
March 3, 2010 at 9:42 pm #93760
It really depends, Bill. Even in a knowledge-based era, you can still assess whether work we do is making an impact or not. I can share with you an example we’ve seen in Rwanda’s health sector, which is replicable and goes straight to what Andrew said at the top about making sure concrete targets are clearly announced from the outset: http://go.worldbank.org/E1GC1YGLM0
March 4, 2010 at 2:17 pm #93758
Thanks for your reply Savi; you raise some really interesting issues
March 4, 2010 at 2:21 pm #93756
Thanks everyone for your input. I have been doing a bit of research on this and there seems to be one important question that has to be answered: does pay for perfromance ever work in public serivces? Ignore specific examples where it hasn’t worked for one reason or another, on a theoretical level, can public employees ever be incentivized to improve their effort and performance by money?? Lets try and get a govloop answer to that: YES or NO?
March 4, 2010 at 4:24 pm #93754
The literature I’m familiar with on the topic points out a few important lessons in the pay-for-performance debate:
There has to be money in the budget to honour the commitment or else things start to get twisted around and it blows up in your face. An exquisite paper in Public Personnel Management a few years ago documented some of the changes that happened in resonse to the Georgia Gain program in that state over a decade. Most notable was a progressive downward drift of performance appraisals as a means of coping with the costs of honouring improved performance. And after busting their hump to earn those performance bonuses, many employees were not particularly thrilled that their extra effort was rewarded with mediocre performance appraisals…so they left. Moral? If you can’t afford to honour it, don’t even attempt it.
It is the case that in the private sector greater productivity is assumed to generate greater revenue for the employer, and performance pay costs are offset by that greater revenue. In the public sector, better performance can often increase employer costs rather than reduce them. If social workers identify 50% more children encountering abusive homes who now need to be protected and placed somewhere at cost to the state, their performance may well be better, but that has resulted in more expense to the state, not more revenue. The bottom line is that many areas of the public sector simply cannot afford the consequences of improved performance, despite how much they crave and promise it.
In the private sector and in some areas of the public sector, performance is easily measured by objective outcomes. In many areas of the public sector “performance” is not so easily operationalized, and in some instances attempts to operationalize it at the individual level can end up rewarding those things that undermine performance at the organizational level.
Case in point. My wife works in an agency that oversees a form of chemical product safety. Manufacturers submit their safe-use instructions/advisories to the agency, and bottom rung evaluators check the documents to make sure that the information is complete, up to date, and coherent. Once out of their hands, the documents go to a reviewer whose role is to impose some degree of uniform quality control across such documents. A simple view of “performance” would suggest that an evaluator who can get through more manufacturer submissions and pass them on to the reviewer is doing a better job. As my wife has been finding out, though, emphasis on “the numbers” is effectively imposing greater burden on the reviewers who now have to make up for the slapdash job done by others at the lower level who are in a hurry to look good. The lower rung comes across as more efficient, but overall throughput is not improved one iota, simply because of the extra work that must be now done by the second rung.
So whatever the indices of performance are, they need to be thoughtful and not counterproductive, Because if you’re going to pay people for more of it, it better damn well be exactly what you want and need more of. Just because you can count it objectively does not make it the right thing to reward.
Another more recent paper that surveyed a number of American state and municipal jurisdictions about their use of broader pay-bands and discretional bonuses for better performance revealed another critical element: parity across managers. Believe it or not, folks who work in the public sector talk to each other. And when the apparent criteria used for performance-pay in one work unit do not seem to line up with the stringency of criteria for performance pay in another, people learn about it fast. This can be very disruptive. The “referent cognitions” model of organizational justice proposes that people evaluate the fairness of individual/organizational transactions by comparing them to what could have happened instead, generally in an upward, rather than downward direction. So if I know that other places are awarding performance pay for what I consider to be something equivalent to my own level of performance….and I’m NOT getting any such bonus, then I interpret my own circumstance as unfair, because they could have implemented performance pay, but didn’t. Unlikely to be healthy for retention or engagement.
The lesson from that is that it is not good enough to merely empower managers to reward good performance and give them the budget to do so. They have to operate under the same agreed-upon standards and monitor parity over the long haul. That will necessarily involve some training of managers.
In many levels of government and in many sorts of business lines, what “performance” consists of is open to question and even when you think you have a handle on it, it is often out of the individual performer’s control. Governments and senior bureaucrats come and go. Projects get funding cut, and priorities of the day change in an eyeblink. So, um, what have you done lately? Well, I know I tried to do a lot, but was not able to finish it for reasons XYZ that “came from above”. I know our government has attempted to use regular employee surveys (similar to the Federal Human Capital Survey) to assess senior bureaucrat performance for performance-pay purposes, and has encountered tremendous pushback, largely because much of what is being measured is often out of even senior officials’ control, or is intrisically easier to do in agency A, than in agency B, simply because of their business lines, geographical distribution, and even current events. So, whatever it is about performance that you’re rewarding, it has to be well within the peformer’s control.
Finally, as far as I remember, bonuses and pay differentials need to be somewhere around 7%, at least, to motivate people to change their behaviour or job. I may be wrong about the specific percentage, but the basic principle is that there is a minimum benefit to the employee required before they will respond to the benefit and change some aspect of their behavior.
Put this all together and whaddya got? If there is something that individuals can do in their job, and accomplish, via discretionary effort, and you can measure it objectively, and it is something that can ONLY provide organizational benefit when accomplished, and the rules and standards can be equitably applied, and you can continue to afford to do it over the long haul, and the amount of earnable reward has some incentive value, then MAYBE your performance-pay program stands a chance.
It’s a lazy day here today. I hope this counts as my “performance”, but I suspect not.
March 8, 2010 at 5:49 pm #93752
Great post! I particularly like your final paragraph. If only we could get that into a policy document!
March 14, 2010 at 1:47 pm #93750
Monty Ignatius SekhukhuniParticipant
Performance related pay in Government indeed can work and is working. The weakness or challenge with the performance system in Government is it lacks the element of service delivery on the generally accepted quadrants. Part of the problem is the performance system is applied in a one-size fits all approach which to large extend has an impact on the overall performance Government. Performance of an individual has a bearing on the unit, the unit on the department; the department on the directorate and directorate on the whole Government Department and Government Department on the entire Government provided a particular Government Department focuses and delivers on the core functions of the Government Department, were support services internally also understands their role within the core function of the Government Department.
March 16, 2010 at 7:24 pm #93748
How could any person in a work unit be “Outstanding” if the work unit didn’t successfully accomplish 100% of their objectives? It happens ALL THE TIME!!!!
I abhor the idea of “Pay for Performance” — individual performance and individual pay being attached at the hip. I prefer the broader view of “merit”-based pay because of the broader connotations. “Merit” can be tailored to to unit, organization and agency needs (Value of person and occupation to organizational performance, standing with peers, standing with customers, initiative in increasing personal value to the organization, turnover risk of person in local/national labor market, consideration of agency and unit performance as well as individual performance.)
March 26, 2010 at 5:49 pm #93746
At one level, what you say makes perfect sense, and I agree with you. The problem is that if a suitably tailored approached to merit-based pay on your floor, leaves people on my floor with the impression that people upstairs get merit pay for accomplishing less than folks on our floor, trouble isn’t far behind.
Ultimately, the challenge is to come up with, and especially communicate and explain clearly and plausibly, what the basis for any seemingly differential merit-based pay scheme is. If you can achieve some degree of uniformity across the organization, more power to you, but a great many organizations face the challenge of having multiple branches or units that simply have to operate in a different way, making the perception of parity in merit-based pay particularly difficult to achieve. And since the purose of merit-based pay is to affect worker motivation, the perception of effort being valued can be undermined by the perception that it is valued more in one corner of the organization more than in one’s own.
March 29, 2010 at 2:32 pm #93744
Performance-Pay (P-P) and Nepotist-Internship (N-I) in .gov/.mil domains have the same problem about half will go to those that are related to management-colleagues. The half of the other half of recognition resources will be distributed by PC-proportions. Until InAgents track and vet performance it is just great political-smoke for the public. .Mil/.Gov Internships should be one-half Veterans (not retirees) and disabled Warriors.
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