PAY FOR PERFORMANCE GROUP 1 by Chitral Amarasiri, Sri Lanka

1. PAY FOR PERFORMANCEGROUP 1by Chitral Amarasiri, Sri Lanka 13th International Symposium - Public Personnel Management Budapest Marriott Hotel, May 15- 19, 2005

2. GROUP 1 • Bahrain - Ahemed A Al-Bahar (Team Leader) • Germany - Ingrid Barb-Priebe • Malta - Joseph Izzo • South Africa - Odette Ramsingh • Sri Lanka - Chitral Amarasiri • Taiwan - Ruey-Hong Chang • Trinidad & Tobago - Earl Blugh • World Bank - John Lavelle • United States - Lynda S Von Bargen • - Neil Reichenberg

3. Content • Objective of the session/ Presentation • Current Status • Obstacles & Barriers • Performance Appraisal system • Non-Financial Benefits • Rewards structure

4. OBJECTIVE To understand country specific “Pay for Performance” (PFP) systems in brief and to share knowledge on selected specific areas.

5. Current Status of PFP - Bahrain • Grade and Step System • Executive, • Professionals, • Judges, • Regular, • Teachers • Annual Increment • Blanket cover – fixed increment • Based on cost of living • Introduced a Pay for performance scheme and it was not successful at the 1st attempt

6. Current Status of PFP - Germany • Grade and Step System • Very structured system • Annual Increment • Blanket cover – fixed increment • No Bonus Scheme or PFP in operation

7. Current Status of PFP – Malta • Grade and Step System • In operation since 1990 • 4 sectors (A, B, C, D) and altogether 20 classifications • A sector salary is 4 times of the D grade salary • One grade to another through an examination • Annual Increment • A sector no increment • B,C,D sector – blanket cover fixed increment • Bonus Scheme or PFP in operation • A sector static Salary + PFP Bonus • BCD sector Salary + increment no Bonus

8. Current Status of PFP – South Africa • Grade and Step System • Equate levels 1 -12 (Structured) • Levels 13 – 16 (Structured but based on individual need) • Annual Increment • Increments are based COL • Union Negotiate increment once in three years • Snr. Management – by the ministry • Bonus Scheme or PFP in operation • PFP based Cash Bonus for levels 13 to 16 • Merit awards for levels 1 to 12 • Birthday Bonus

9. Current Status of PFP – Com Bank Sri Lanka • Grade and Step System • 5 Grades and 12 classifications • Promotions – Non-Executive to Executive by an Exam • Other Promotions based on performance • Many perks tag with the grade • Performance Standardization • Annual Increment • Non Executives : Union negotiate increment for three years • Executive staff : increment on performance only • Major salary anomaly issue • Bonus Scheme or PFP in operation • Executives 4 grades – PFP Bonus + Holiday allowance • Others categories of employees – No bonus

10. Current Status of PFP – Taiwan • Grade and Step System • Commence 40 years ago • 14 Grades with different classifications • Promotions are based on seniority • Strategically driven – cascaded to agencies • Agency level performance committees • No negotiations • Annual Increment • Fixed Increment • Bonus Scheme or PFP in operation • 3 years ago PFP Bonus scheme commenced • Professional merit awards, cash rewards (CEO, Units:80%, Individual:20%)

11. Current Status of PFP – Trinidad • Grade and Step System • Job classification and point based system in place • Snr MGT, Judicial, legal officers determined by the SRC, Judicial and legal salaries based on guide chart method of job evaluation • Snr. Management : flat scale salary rates • Salary structures for teachers, police, fire and prison services are based on negotiations by unions + guide chart method. • 64 salary grades in the civil service and salary rates are based on position classification method of Job Evaluation. • Professional, technical staff salaried below the mkt rate + special allowances • Annual Increment • Based on satisfactory performances • Bonus Scheme or PFP in operation • No PFP Bonus scheme

12. Current Status of PFP – World Bank • Grade - Hay System • Job classification grades • Salaries are adjusted as per the Market rate comparison with selected international agencies. • Annual Increment • Based on performances rating Matrix • Bonus Scheme or PFP in operation • No PFP Bonus scheme

13. Current Status of PFP – Montgomery College • Grade System • Job classification grades • Snr. Management, Staff (14 grades), Faculty • Negotiation process for staff/faculty categories • Annual Increment • Snr Mgt : performance based increment • Staff : COL adjustment + Merit performance • Faculty: one scale, COL + Merit performance • Bonus Scheme or PFP in operation • No PFP Bonus scheme

14. Obstacles and Barriers • Issues pertaining to subjectivity • Applicability • Funding issue • Right awareness : training issues • Knowledge of supervisors & Job incumbent • Cultural & Communication issues • Consider the interest of various stakeholders • Legislation issues – parliament, etc Some are not keen, since they feel that PFP in the public sector will be more a de-motivator

15. Performance Mgt. System • Considered as a powerful management tool • Strategically driven – Long/Medium term, cascaded • Planning & implementing – KPIs/KRAs, clear measures, • employee feedback, industrial relation, • training and development, • succession planning, etc • Success depends on; • System (Process), Simplicity (Format), Supervisors, • Training : Mandatory, but many create the need, structured Tra. • Can we abandoned the Performance appraisal system in the public sector? • Credibility is an question, Does it serve the purpose? • Is it a grievance handling mechanism • Is it waste of executive time and paper? • With technology world is changing is this out dated? • More a employee de-motivator than a motivator • Is it too clinical? Assigning 4.99 or 5.00 to a human output • Is too democratic and too transparent?

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

17. Today’s Challenges • Characterized by uncertainty and challenge • Customer/Beneficiary is more sensitive than before • Funding are under pressure • Increasing role of technology • Creation of a new type of workforce • Leaner and flatter structure • Attracting and retaining talent • Shift from seniority to performance • Developing ownership and empowerment

18. Pay for Performance or 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.”

19. Affiliation Career Value Work Content Indirect Financial Rewards Direct Financial Rewards Total Rewards Total Rewards cover everything an employee gets as a result of working for an organization, including all aspects of the work environment, as well as all elements of compensation (remuneration and benefits).

20. Total Rewards Approach • Reward mix decisions made in context of all forms of rewards: cash, benefits & work environment; • Remuneration is a hygiene factor • Additional investment in remuneration will only lead to marginal improvements in employee engagement and in turn business results; • Additional investment in the work environment will lead to superior improvements in engagement and in turn lead to better business results.

21. Maximising Return on Reward Investments % ROI Work Environment Investment Superior Returns Remuneration Investment Competitive Returns Fair/Reasonable Investment Additional Investment $ INVESTMENT Total Rewards Approach • Beyond the “fair and reasonable level” : Studies show that marginal ROI is significantly higher if you invest in building a more rewarding work environment - specifically focusing on the key drivers of engagement.

22. Types of incentive pay plans

23. Types of incentive pay plans

24. Thank You!Chitral Amarasiri- Sri Lanka