Pay for Performance Could Work?

Pretty interesting article on pay-for-performance.

What is your take? How important is pay-for-performance?

Part of my hypothesis is that “private sector” does not have a perfect pay system themself. Outside of certain roles like sales, lots of jobs have hard time measuring concrete performance and negotiations is truly what makes higher salaries (not performance).

Outgoing intelligence HR chief says pay-for-performance can work
By Alex M. Parker
Personnel reform has a better chance if stakeholders are given a seat at the table, Sanders says.

Full story: http://www.govexec.com/story_page.cfm?articleid=44398&dcn=e_wfw

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Profile Photo Tricia

I agree with the idea of Pay-for-peformance – for a few reasons:
1. why is it someone should be compensated for just showing up every day and doing little-to-no work, (plus, supervisors more often than not don’t take the time to mentor and or realistically evaluate how their employee(s) are performing), so then employees receive an increase/additional compensation for surviving another year on the job while a few others are working their butt off for the same pay/benefits.
2. Why not provide compensation for attaining certain goals/objectives which have been set up and communicated to employees? These should be set at above and beyond the normal expectation of the job.
3. Realistically, if you are working at a supermarket as a grocery checker, how much should you be compensated after 20 years? People top out salary-wise (are you going to pay them $70/hr becasue they’ve worked for you for 30 years at the same job?), as well as career-wise (that cashier with a high school diploma isn’t realistically going to be promoted to the supermarket accountant without attaining additional education and training). This is a way to provide people something additional for what they do above and beyond.

Pay-for-peformance. (like anything else, really!) has pros and cons.
Pro’s:
– gets people motivated
– more instances of innovation/creativity (direct reward attached!)
-if tied to team performance – coworkers motivate each other & put pressure on others to perform
-peforming employees view it as “fair” – why is it someone should be compensated for just showing up every day and doing little-to-no work.

Con’s:
-backstabbing to move to the “top” of the performers list
-if done on team basis – the whole group benefits (including those doing little/no work)
– expectation to receive some form of compensation for being a star employee
-employees start to consider this “additional” compensation (above/beyond their base salary) as part of their salary, and if it goes away, they may become unhappy or less productive then they once were on the job.

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Profile Photo Douglas L. Schultz

Pay for performance briefs well, but is a flawed concept from the start. First of all, working for the government (as an employee, not a contractor) was never about the money, it was all about public service. Everyone knows that government employee salaries routinely lag those of the private sector – for good reason. There is a limit on how much value taxpayers place on the support their government provides, especially when any increase is likely to come from unpopular revenue generation means like tax increases or bond issues. Public service is more about giving than receiving. Like I said, it was not about the money – until NSPS came along. In its best implementations, it offered little more in the way of incentive than the old GS system. Salary increase = Quality Step Increase. Bonus = Performance Award. A good supervisor has always had the ability to set meaningful performance objectives and provide ongoing assessments. But the administrative support for NSPS created a tsunami of additional time-consuming check-the-box requirements that quickly outweighed any value it provided. What caused real consternation was the ability of some characters to hi-jack the system to pad the pay of their buddies, while the silent majority continued to plod along as “Joe-Average Level 3’s”. Bravo to the Congress for finally pulling the plug on the failed experiment of NSPS!

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Profile Photo Tricia

Douglas –

Thanks for the viewpoint! As an HR professional (State Level) who does a lot of recruiting, people tell me that they want to work in government because of the health benefits, retirement plan, and the fact that they don’t have to take their job home with them (essentially work more than 40 hours/week).

Granted, there are some people who are interested in public service, but my experience is that there are few – at least here in Az. If government is obtaining workers who are interested in public service, then government needs to get busy (and the Partnership for Public Service needs to do much more promoting) to attract these individuals. I’m not hearing that when I speak with people actively seeking work (even before the downturn in the economy).

The state of Arizona salaries are currently lagging private sector by 9.5%. People haven’t received any increase in salary for 3 years now (I believe Federal gov’t received increases last month). Right now our state legislature is looking at passing a 5% pay cut across the board. This will put us at 14.5% behind public sector (salaries unfortunately aren’t going to move back up that 5% when the economy improves). This, plus the rising cost of healthcare, retirement contribution increases, and the fact that there are people having to take on additional duties (due to layoffs, and positions left unfilled and those job functions still needing to be done) certainly make public service less attractive. If positions are left unfilled, one of the ramifications is that government very likely may not be able to provide essential services to its citizens. Right now in a down economy, do I believe it is easier to attract people to public service? Most definitely – in fact we all hear how the Federal government is adding positions – not true at the state level (I believe there are 36 states right now experiencing budget troubles). If we did have positions to offer, people would jump at them right now (this of course due to high unemployment rates) and I would easily find qualified applicants for my technical hard-to-fill jobs. After the economy improves? Right back to where I started – people jumping ship to go work in private sector or for the Federal government where it pays more.

I hear you – “A good supervisor has always had the ability to set meaningful performance objectives and provide ongoing assessments” – unfortunately, having the “ability” doesn’t guarantee that they will follow through and actually execute. It sure would be nice not to have to send out reminder after reminder to most supervisors to complete evaluations.

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Profile Photo Douglas L. Schultz

Trying to keep this short. Lots of psych studies on motivation – no need to belabor here. Bottom line is that pay is actually a negative motivator. If there is not enough, people get angry. If there is enough, people are generally satisfied. If they are already satisfied, more money will not necessarily lead to increased performance. Think about the employee who already gets paid for just showing up. That doesn’t mean rewards are unnecessary, just that pay by itself isn’t a good choice, especially when you’re limited by circumstances beyond your control on how much you can offer.

I am in my third year of being an NSPS employee and supervisor in a fairly large organization. My experience has been once of continual dissapointment, both from hard-working employees who feel they were slighted (as “Valued Performers” – a 3.0 on a 5.0 scale), and by others who despite prohibitions on sharing salary info, disclosed individuals who just “showed up for work” but got a great write-up and were hugely rewarded. And oh, by the way, all that stuff about hiring flexibility resulted in zero improvement in the time it took to bring a new employee on board (on average about 6-8 months).

Since NSPS did not improve general conditions appreciably, why not go back to a system that, although flawed, at least did not carry the administrative burden on employee and supervisor that NSPS imposed.

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Profile Photo Douglas L. Schultz

Tricia, thank you for a perspective from state government. I understand your perspective, and can see where we feds should probably just stop whining and be happy with what we’ve got. Even the “Joe Average 3.0” folks got raises, and most were at or above the general pay increase voted each year by Congress. You mentioned recruiting feedback, and I couldn’t agree more that other “safety” factors like health benefits, retirement plan, etc. make public service more attractive in a down economy. In fact, if the economy doesn’t pick up soon and we continue to increase deficit spending, federal employment may also become more insecure. Perhaps a down economy turns Herzberg’s theory of motiviation on its head!

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Profile Photo Steve Ressler

Interesting dialogue. I like Tricia’s point and I do think this varies a lot from federal to state to local govt. From what I’ve read, federal govt is the highest paid and every year gets a raise and almost never does layoffs – mainly because they don’t have to balance the budget.

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Profile Photo Douglas L. Schultz

All things considered, I still think the underlying assumption that simply increasing pay will somehow improve performance is incorrect, based on 30+ yrs of observation in government. Increased pay may be a strong motivator for seeking another job (or even ANY job), when an individual is unemployed or already feels underpaid for doing what they are asked. Am I a minority of one?

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Profile Photo Steve Ressler

Actually there is a lot of research that shows pay is not the #1 motivator. I think some of the factors above it are 1) autonomy 2) trust 3) feel like having a true impact and real issues.

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Profile Photo Douglas L. Schultz

Thanks for your response. I completely agree with your assessment of factors that do actually make a difference in performance. That’s where NSPS went astray – by allowing the focus to fixate on pay alone, independent of other forms of recognition.

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Profile Photo Joey Seich

I agree with a lot of what Tricia is saying, why is it someone gets an increase for just showing up each day to work? Goals and objectives need to be set above the standard bar. I’m a big fan of SMART goals (specific, measurable, attainable, realistic, timely). I think people need goals to improve or there’s really no incentive to work harder.

Of course, coming from the private sector, I’ve seen many of the imperfections of the private sector pay system and agree wholly with the fact that negotiations are truly what make for higher salaries.

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Profile Photo Peter Ward

Pay for perfromance, properly structured, can be achieved in government. Transparency, governance and linking role clarity/KPI’s to agency strategy and outcomes are the key. Here at SA Water Corporation we can offer competitive salaries ( at the lower end of private sectir comparators) but with lifelong learning, good HR policies and great workplace conditions and this is good for attraction and retention

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