Performance Based Incentive System PBIS

1. Performance Based Incentive System PBIS Bharat Gautam, PhD 2075.02.02

2. Performance Based Incentive SystemPBIS Outline • Concept • PBIS and Compensation Management • Stepsof PBIS Application • Sample of PBIS Indicators • Standards of Performance Indicators • International Reference of PBIS • Viable Sector of PBIS: Garbage Collection • Legal Provisions • Sample Case, PBIS Application • Conclusion

3. PBIS… Concept • Linking between employees performance and pay: Pay for pay performance. • Incentive or Reward should be provided according to employees performance: (Individual or working unit or organization). • Incentive should not be commonly provided. • Focusing on achieving targets/outputs/results and rewarding high performer employees financially is the main essence of PBIS. • What efforts we made is not important, whether we achieved our targets/outputs/results or not is importantto receive incentive.

4. PBIS Concept... The Concept of PBIS is originated from New Public Management, (NPM) oriented Performance Based Management (PBM). Forms of Performance Based Management • Performance Contract • Performance Agreement • Result Oriented Management • Outsourcing / Contracting Out • Pay for Performance • Performance Based Incentive System

5. PBIS and Compensation Management • In this Presentation, we also consider PBIS as a Part of Compensation Management. • What employees receive in exchange of jobs is broadly understood compensation that is salary and additional incentives. • Compensation includes Monetary and none Monetary incentives. • Managing financial and non-financial incentives is a part of compensation management. • Obtaining, motivating, and retaining productive human resources and achieving organizational goal is its main objective. • PBIS is considered as an effective managerial tool to achieve set targets.

6. PBIS and Compensation Management Types of Compensation 1. Direct Compensation: Monetary: Salary, grades, gratuity, provident funds, all kinds of allowances, rewards, insurance, bonus, pension etc. 2. Indirect Compensation: Non- Monetary: Recognition, promotion, appreciation, exposure, study and trainings, more responsibility, preferential transfer for better delivery etc. Direct and Indirect compensations also contribute to increase confidence of employees and motivate to work hard. Direct compensation can be linked with the performance of employees under the framework of PBIS to reward high performer employees.

7. PBIS… To measure results and reward succesful employees is its main essence. Related Statement, “ If we don’t measure results, we cannot tell success from failure If we can’t see success, We can’t reward it If we can’t reward success, we are probably rewarding failure...” Osborne and Gaebler, Reinventing Government, 1992

8. PBIS… Steps: PBIS Application • Breakdown of organizational functions and Assign Jobs to working units and employees in measurable terms, • Job descriptions, performance targets, indicators, and measurements • Job descriptions are only not sufficient for PBIS, • Job Standards- benchmark, requirements, timelines, quantity and quality are also required. • Monitoring and Evaluation of Performance • Financial Incentive/Monetary reward to high performer employees, work unit, organization based on their performance.

9. PBIS… Standards of Performance Indicators are very much Importantin PBIS Examples Meeting Minute Standard: Date, Time, and Venue, Agenda, Attendance, Discussion, and Decision/s, Dissemination and Documentation Tippani : Three Layers of Decision Making Initiator- Issue, related information, alternatives Reviewer- Review, analysis and own opinion Decision Maker- Judgment and decisions

10. PBIS… Application of PBIS/PBM oriented International Reference In UK, Performance Award/Reward/Incentive • Performance Award is provided to the Doctors at National Health Service, for meeting medical targets. It is also applied in Public Schools In New Zealand, Performance Agreement • Executive Chief of the government agencies through setting key result areas to measure performance for their re-appointment and financial incentives. In the USA- Performance Incentive • Social Security Administration was rated world class service providers, In Kenya , Performance Contract and Financial Reward • To improve the performance of Ministries and Departments • Ministry of Tourism was rated for the excellent performance in many years.

11. PBIS… Viable Sectors and Areas of PBIS Application In Nepal • Private Sector and Other Non-Government Sectors • Public Sector– Civil Service and Public Organizations Development and Service Oriented offices Even in Rule based organization such as Ministry of Law • Reference Example, Garbage Collection : Time Indicator and Incentives Tourism Development : Targets and Incentives Cleaning Workplace / Office: Frequency and Standards

12. PBIS… Application: Performance Indicators and Standards both Requires Case 1 : Department of Civil Personnel Records • Initial Stage of Application of Performance Based Incentives Issue: Developing Individual Employee's File • Target was given to an employee to develop 100 individual Files • Number of files were also developed • In monitoring, it was found that in most of the files were incomplete of the basic documents. Case Learning : Therefore, set targets are only not sufficient for the effective application of PBIS, standard performance is required. Case 2 : Case of District Agriculture Office Kavre JTA: Agriculture Technician Three Meetings of Farmer Groups in a month were set. But, it was found that meetings were held in District Office not in the fields.

13. PBIS… PBIS Application in Nepal… Linking Financial Incentive with Performance Targets, Introduction of PBM oriented Incentive Idea: Governance Reform Program, GRP (2001-2005-2007), Financially supported by ADB Piloted Ministries: Ministry of Agriculture: District Level Agriculture Office Ministry of Health: Health Posts and Sub Health Posts Ministry of Education: District Education Office, Kathmandu GRP was Phased-out in 2007, Performance based incentive policy could not be continued in these Ministries.

14. PBIS…Application in Nepal… Some Examples of Application Financial IncentiveBased on Indicators, Addition to Salary • First Introduced in Birgunj Dry Port Custom Office and Large Tax Payer Office in 2006, • Custom and Tax Offices (200%, 100% 50% of the Salary ) • Department of Civil Service Records, (150 %, 100% 50% ) • Office of the Auditor General, (100 50% ) • District Treasury Offices, (50%) • Office of the Prime Minister (50%)

15. PBIS … • PBIS Related Legal Provisions in the Civil Service • 2nd Amendment of Civil Service Act and Its Rules, 2007 • Result Orientation • Provision of Performance Incentive Fund • Performance Contract/Service Contract. • Performance Agreement and Outsourcing of Manual Services • Good Governance Act, 2007 • Performance Contract and Accountability to Contractual Jobs.

16. PBIS... Yes, we can link PBIS in Garbage Collection and Management • Garbage Collection of the Kathmandu and other Urban Areas is the Viable Area of Application of PBI System in Nepal. • Simple Sample Indicators for the Thoughts • Time Indicators can be set, • If Garbage collected by 5 am, .... % of the Basic Salary • If Collected by 7am, ... % • If it is Done by 8am, ... % • If is done by 9am,... % • After 8am, no incentive Areas Specific Collection and Standard of the Collection should also be given to the Collectors.

17. PBIS…, Conclusion This may not be viable to link Salary with the Performance of Employes as a whole But, we can link aditional Financial Incentive to the employees' performance in the Nepalese context. Viable Model of PBIS For rewarding high performing employees, working units, and organizations it can be applicable and replicable based on the Jobs of the Organization and employees • Job descriptions + Performance Targets + Indicators + Measurements • Jod Standards. • Integrated Incentive Scheme: Basic Salary + Additional Financial Incentives • Strong Monitoring and Evaluation Without strong monitoring and evaluation system, Organization/government may loose huge amount of financial resources in the name of Perfomance Based Incentives just relying on weakly set so called Targets.

18. Queries and Discussion