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Has linking performance to pay worked in the Malaysian Public Service?

Has linking performance to pay worked in the Malaysian Public Service?. Prof. Datuk Dr. John Xavier Graduate School of Management Universiti Putra Malaysia 8 th May 2012. Does Performance Pay Work in Malaysian Public Service?. Elements of performance pay. Outline. Do these elements work? .

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Has linking performance to pay worked in the Malaysian Public Service?

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  1. Has linking performance to pay worked in the Malaysian Public Service? Prof. Datuk Dr. John XavierGraduate School of ManagementUniversiti Putra Malaysia8th May 2012

  2. Does Performance Pay Work in Malaysian Public Service? • Elements of performance pay • Outline • Do these elements work? • Lessons from Malaysia Prof. Datuk Dr. John Xavier

  3. Elements of performance payin the Malaysian public service • Annual increments in salary • Promotional increments • Bonus • Excellent service awards • Pension benefits • Incentives for teaching excellence • Departmental-wide incentives Prof. Datuk Dr. John Xavier

  4. Move to PP:always trying harder but failing • Efficiency evaluation abolished • - Competency assessed by PROSPEK • 2011 2008 KPIs for CEOs with performance pay (aborted at the outset) Prof. Datuk Dr. John Xavier

  5. The 1992 New RemunerationSystem introduced PRP Diagonal (2%) – Excellent Performance Vertical (3%) - Good Horizontal (90%) – Satisfactory Static (5%) - Unsatisfactory Instituted flatter structures (for better performance) by compressing the previous 9 management grades into 3 Prof. Datuk Dr. John Xavier

  6. PP under the 1992 NRS was nicein theory but bad in practice! • Subjective and opaque evaluation • Quota system (2% - diagonal; 3% - vertical; 90% - horizontal; 5% - static) • Award contingent on rotation and period of service in the agency • Longer wait for promotion given flatter structures • Union opposition led to its disbandment Prof. Datuk Dr. John Xavier

  7. 2002 Malaysian RemunerationSystem (MRS) sought to introduce PPby equating competency to performance Competency = Performance Accelerated increment upon excellent grade in the Competency Exam Reinstated the former hierarchical levels back to 9 Prof. Datuk Dr. John Xavier

  8. The 2002 MRS fared no better in its PP venture! • Competency assessments became controversial • MRS fell under union fire • Now annual increments are automatic Prof. Datuk Dr. John Xavier

  9. 2012 New MRS • Offers a single-band min-max pay scale with discretionary annual increment between RM 100 - 230 • But pressure mounts to standardise increments Prof. Datuk Dr. John Xavier

  10. Annual increments • Are annual increments linked toperformance? No • Do they reward and motivate public servants? Hardly Prof. Datuk Dr. John Xavier

  11. Do increments frompromotions work? • In a diffused way: - Promotions bring prestige, expanded position, power, greater responsibility, increased salary and ability to rise even further- The pension factor – last drawn salary – but so out in the future • However: - The promotions system is perceived to be unfair- Promotions are done in batches and centrally controlled- Evaluations are subjective - Promotions are more time-based Prof. Datuk Dr. John Xavier

  12. Does bonus payout have anyimpact on reward and motivation? • Across the board standard payments (not more than one month) – varying only across the managerial and non-managerial groups on grounds of equity • None. Why? • Cf. government-linked companies and self-financing corporate bodies • - Mostly standard but larger (3-5 months) payments and rarely varying across the individuals Prof. Datuk Dr. John Xavier

  13. 2008 PP for CEOs waslaudable but also failed • First attempt to put CEOs on PP • Proposals: • - Existing CEOs were to be retired and reappointed on performance contracts for three years with double the original salaries • - Bonus payments of 3, 5, 8 - months’ pay for achieving on-target performance and stretch targets of exceeding-target and significantly exceeding-target performance respectively • - PRP component did not materialise given issues of equity and affordability • KPI component survives without the PRP booster but its cascade has been stymied Prof. Datuk Dr. John Xavier

  14. The scrapped 2012 PublicService Remuneration System • Sought to introduce PP by resurrecting the failed policy proposals of 2008 • - Competitive salaries (double the previous amount) with KPIs for top management (premier grade) officials whose performance will be evaluated twice a year • Talent management • - CEO appointments with performance contracts • - Flexible entry and exit policies • - Succumbed to union pressure for grave inequity Prof. Datuk Dr. John Xavier

  15. Annual ExcellencePerformance Award • USD 330 + certificate • - Limited to 8% of the employees • - No impact. Why? • Subjective assessment • Rotational system of selection Prof. Datuk Dr. John Xavier

  16. Where is the PP then? • In hybrid agencies – PEMANDU, Talent Corp.,Innovation Corp. • Team-based award in the teaching profession • - For the headmasters and teachers (USD 6,000) who are picked as high-performing schools • - Selection of excellent teachers • - In government-linked companies and self-financed corporatisedbodies Prof. Datuk Dr. John Xavier

  17. Hawthorne orExpectancy Effect? • Hawthorne only if the individual knows he is being fast-tracked • Mostly expectancy effect of promotions and pensions • New PP initiatives degrade upon • - Arbitrary implementation : • opaque, subjective, additional departmental criteria • - skepticism Prof. Datuk Dr. John Xavier

  18. PP and goal alignment • PP may be prejudicial to goal achievement • PP – short term; goals – long term • If well formulated, PP should promote departmental goal achievement • The responsibility to align PP to the strategic agenda is that of senior management Prof. Datuk Dr. John Xavier

  19. So what motivatesa public servant? • Calling? Need to take this with a pinch of salt as the public service is not the employer of choice and job security • Passion and fulfilment • Leadership • Work environment - empowerment • Non-monetary benefits Prof. Datuk Dr. John Xavier

  20. What to think of PPin the Malaysian public service? • Fools rush where angels fear to tread? • Never afraid to push the envelope • Always trying harder in the hope of getting the formula right • In the process engendering a culture of performance Prof. Datuk Dr. John Xavier

  21. Will PP work? • If conditions hold: • - Transparency • - Merit • - Objectivity • - Fairness • - Effective PMS Prof. Datuk Dr. John Xavier

  22. We can learn from theMalaysian experiment • PP component must be identifiable and sizable • Culture and equity • Better team-based than individual biased • PP is only as good as the performance management system • Political will to drive PP from the top • No arbitrary implementation for healthy competition • PRP must be applied across the hierarchy • Managing expectations by engagement • Never give up! Prof. Datuk Dr. John Xavier

  23. Thank you for listening! johnantony@putra.upm.edu.my johnantonyxavier@hotmail.com Prof. Datuk Dr. John Xavier

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