PERFORMANCE APPRAISAL IN THE CIVIL SERVICE: Challenges in EU and OECD countries

1. PERFORMANCE APPRAISAL IN THE CIVIL SERVICE: Challenges in EU and OECD countries Chisinau, 6 May 2010 Francisco Cardona SIGMA

2. Improving Performance in Public Administration • It is an increasing preoccupation in all OECD countries for the last 30 or so years • Three interrelated concepts have developed around such preoccupation: • Performance management: a kind of public management oriented to achieve results • Performance evaluation or performance appraisal (individuals /institutions) • Performance related pay

3. MODERNISING THE CIVIL SERVICE: AN EVOLVING NOTIONAccumulation over time of expectations concerning the civil service 1 19th Century up to 1950s ►Procedural legality and institutional continuity of the public service, based on administrative law : • Putting the public administration and the civil service under the rule of law • Public administration is special with regard to the private sector, as it deals with public power and therefore it needs to be regulated by administrative law

4. Accumulation over time of expectations concerning the civil service 2 1950s – 1970s ►Equal access and equality before the law (embracing the merit system) : • Impartiality and political neutrality • The merit system is definitively recognised in a generalised way in western democracies as “the best solution” for the professionalization of the civil service and state machinery • In certain countries with ethnic or social minorities the issue of social representativeness of the civil service leads to the introduction of positive discrimination (e.g. affirmative action schemes) and ethnic quotas.

5. Accumulation over time of expectations concerning the civil service 3 1970s – 1980s ►Responsiveness to requirements from politicians and to fit better with the political expectations of the government of the day • Politicians become frustrated with the impartiality and political neutrality of civil servants: The civil service and administrative law are perceived as hurdles to realise and attain political objectives • The civil service should be at the service of the government of the day. The bureaucratic power should be kept at bay by the politicians for the safeguard of the democracy.

6. Accumulation over time of expectations concerning the civil service 4 From the 1980s to 2007 ►Productivity and Performance • Increasing political competition leads to electoral promises (often populist ones) whose fulfilment requires more public expenditure (the slogan “to do more with less” is born) • Results measurement and use of measurements for planning, control and accountability • Looking around for management role-models in the private sector: the transplantation of private management techniques in the public sector gives it a façade of more legitimacy (in the so-called era of managerialism) NPM is born

7. Accumulation of expectations 5 2008 onwards • Financial and economic crisis generated by bad management in the private sector in leading OECD countries • Managers in the private sector questioned (to an extent) as well as their managerial practices • Demand for better and tighter regulation and more effective controls over the private economy • But public servants expected to accept salary reductions • Moving towards a stronger reliability paradigm?

8. Some public management result oriented, multi-dimensional reforms up to 2008/2009 • Managerialism: Let’s managers manage (the manager-politician and the politician-manager): flexibility (or de-regulation) is the new rule • Strategic Planning and budgeting for results • Performance control is added to the traditional financial control, internal and external • Improvements in internal working procedures to achieve more transparency and citizens’ participation • Introducing public service quality management tools • Policy evaluation • Impact assessment and quality of regulation, etc. • Remuneration variable, contingent to appreciation of managers

9. Budgeting for Results? 2004 OECD study data • It not yet a generalised practice: a rather confusing picture emerges • 52% of the OECD countries set budgetary objectives • 42% do not bind budget expenditure to objectives • 31% do not bind past results achieved and future budgetary resource allocation • 46% do not have any formal mechanisms to reward or punish budgetary performance • 11% pay bonuses for individual results

10. Managing by Objectives? • Some countries have developed mechanisms for setting and evaluating programme objectives as well as ways to use the information provided by such evaluation to feed the internal decision-making processes • 72% of the countries claim they systematically prepare yearly reports on implementation and achievement of objectives • 50% claim that that information is used internally for setting managerial priorities, new resource allocations to programmes or to reforming internal working procedures, but enormous variation across countries exist • Almost no country uses the information provided by the evaluations to set individual objectives to civil servants

11. Development of managerial capabilities? • More leeway for managers’ discretionary decisions (let’s managers manage)? • Relaxation of formal internal control mechanisms Flexibility • How to promote and protect the impartiality in the civil service? Information is scarce on whether a new balance has been struck between managerial discretion and controls, i.e. on what is the adequate degree of flexibility. The most flexible OECD countries seem to be NZ, SE, FIN, DK, and Norway

12. Some major organisational challenges • Information management (flood of info?) • Management of the accountability within the organisational structure (internal allocation of responsibilities and in relation to other public organisations): who is responsible and accountable for the outcomes of a policy? • Management of the measurements and preventing dysfunctional behaviours: to measure in order to reduce uncertainty • Design and management of the interface between politics and administration

13. Performance appraisal in OECD countries • The majority of OECD countries claim they have a performance appraisal scheme based on objectives rather than on job description or personal qualities and that it applies to almost all civil servants (except Greece, Iceland and Luxembourg) • Many countries have attempted binding institutional and individual objectives (“cascade objectives”) with extremely limited success or no success at all • Many countries have performance appraisal systems different to ordinary employees and managers (Canada, Korea, DK, USA, Ireland, Italy, Norway and the UK): Evaluations are geared more towards developing the public management capabilities than to a reform of the civil service as a whole • Almost no country has solved the problem of “non performers” or “bad-performers” • 2/3 of the countries have attempted to bind performance appraisal and remuneration

14. Most frequent reasons given by countries to introduce PRP (great variation across countries) • To improve the motivation of the employees • To attract and retain good professionals • To facilitate changes of management systems by strengthening the leadership: to introduce efficiency values in PA • To keep personnel expenditure under control or reduce it • To increase the accountability of the employees (no more employment for life and no more automatic salary increases) • Fairness: those who work harder should be paid more

15. Does PRP work in the public service? Four general comparative surveys have been carried out in European and OECD countries: • EIPA 2002 for the Meeting of Directors General in La Rioja (Spain) in May 2002 on 15 MS • OCDE 2005: “Performance-Related Pay Policies for Government Employees” • EIPA 2005 on 24 MS plus Norway and the EC • Demmke et al. in 2007 on the actual practice of performance appraisal

16. Conclusions of these studies 1 • PRP schemes are expensive and their implementation requires a lot of time and energy • In general the portion of remuneration to PRP is low and the discretion of managers relatively small (5-10%) • There is a lot of modest experimentation with PRP in old democracies (in contrast with CEEC) • Almost no system deals satisfactorily with non-performing employees • Performance measurement is extremely difficult • No evidence found that PRP improves the overall performance of public organisations, or brings about better HRM or better quality of public services • Employees do not find that PRP improves their motivation

17. Conclusions- 2 • On the contrary, regular dialogues between managers and employees on the individual performance , objective setting and review exercises have positive effects on personal motivation at work: many civil servants consider that it as an acknowledgement of their personal contribution to the overall objectives of the institution employing them • Need to invest in personnel policies aimed at increasing attractiveness of the public service: • Decent basic remuneration • De-politicisation • Professional training and personnel development • Developing a public service ethos…

18. Obstacles to Performance Appraisal • Absence of a performance- geared administrative culture reduces appraisals to mere formalities • Tendency of bureaucratic cultures to establish heavy and complicated appraisal procedures • Tendency that almost all employees are appraised as excellent (managers tend to avoid personal conflicts) • Difficulties in balancing team and individual performance appraisal (more difficult if PRP is present) • Unclear definition of the rationale of the performance appraisal: Promotion? Remuneration? Personal development? Training? • Organisational energies are focused inwards instead that looking outward to the service of citizens • Lack of transparency and excessive subjectivism of the appraiser • Absence of a culture of delegation and trust

19. Main criteria used in performance appraisal

20. Main implementation contextual difficulties : a context lacking: :

21. Delegation in HRM: Performance appraisal and remuneration

22. Main Lessons from International Experience • Need to couple budget policies and HRM • Do not underestimate the costs associated to the design, introduction and management of the performance appraisal system • Take into account the country’s administrative culture (e.g. before introducing performance appraisal, reduce “order and command” attitudes) • Precision and clarity in legal regulation of the procedures, especially in countries with strong legalistic traditions • Design of the procedures should be simple, clear, and with few variables and little formalisation (e. g. use guidelines instead of government decrees) • Performance appraisal should be understood as a managerial responsibility and done by immediate superiors . The centre should clearly delegate in managers this responsibility • Beware that PRP bears little motivation on employees , but may reinforce the power of managers

23. Some general conclusions • Performance appraisal is an instrument: the goal should always be the improvement of the quality and the efficacy of the public administration (which also is very much dependent on the quality of the organisational design as well as on the design and implementation of public policies) • Should the management be evaluated or the policies? Or both? • PRP is liable to produce more negative than positive effects on personnel motivation and in the civil service system as a whole, especially concerning the impartiality • The costs associated to the introduction and running of the system are high in terms of money, time and managerial energy

24. Some conclusions-2 • Performance appraisal may be useful as a tool to support the personal development of civil servants if it is seriously factored into the HRM system • One condition is the development of the HRM function within the civil service, including delegation (and therefore more and better internal and external accountability mechanisms) • Potentiate and refine the appraisal dialogue: it is one of the most positive aspects of the tool • Take permanent care that the tool keeps and increases its legitimacy • Be aware that the tool is seen as an instrument reinforcing the power of managers: use it prudently in practice, with equity, fairness and equanimity