Performance Related Pay in Civil Services of OECD and EU countries

1. Performance Related Pay in Civil Services of OECD and EU countries Francisco Cardona Sigma Workshop on Remuneration Systems for Civil Servants and Salary Reform Vilnius, 14 December 2006

2. Before 1980s►Pay per grade • In the 1980s: ►PRP in UK, NZ, NL ►Some moves in Austria, Australia, Denmark, Finland, France, Germany, Norway, Spain ►Canada and USA had had PRP for a long time for senior and middle managers

3. PRP for management positions • Used mostly to fill the remuneration gap of between managers in the private and the public sectors • Problems: ►Internal equalization of salaries (pressure to increase salaries across the board) ►No evidence found of links between PRP for managers and improvement of performance in public organisations

4. PRP for non-managerial positions • Little evaluation of the effects of PRP for non-managerial positions (most evaluations refer to Australia, UK and USA) • Very limited success • Staff rating the scheme as de-motivating (only a few staff get bonuses) • The performance appraisal scheme put into question altogether (de-legitimating the scheme)

5. Negative side effects of PRP • Increases in personnel costs (escalation of personnel ratings and payments) • Unions tend to see PRP as a negotiable part of the salary • No PRP scheme can be completely objective (the tiny line between subjectivity and arbitrariness is easily trespassed) • No evidence found that PRP has increased productivity or better quality of public services • Bureaucracy increased in HRM

6. Some (negative) conclusions(EIPA survey 2002) • PRP is costly and time-consuming to implement • PRP schemes only applicable for managers • Small pool of money for PRP • Mostly pilot projects in specific agencies • PRP schemes do not address underperformance problems • Measurement of non-quantifiable outputs is almost impossible • Additional remuneration not seen as a significant motivator

7. Some (positive) conclusions • Regular formalised discussions between superiors and subordinates on performance, target-setting and progress achieved have positive effects on motivation

8. PERFORMANCE MANAGEMENT: an alternative? • Late 1990s and 2000s: Performance Management as a new approach in NZ, Australia, Canada, UK and USA) • Meant to link management with institutional goals and strategies • But is difficult to find working linkages between individual, unit and institution target-setting • And consistency throughout the political, policy-making and managerial processes is difficult to ensure • And, again, it is difficult to measure performance even if in some countries “performance audit’ was introduced

9. ACCOUNTABILITY AND MOTIVATION • Objectives of Performance Management: More and better accountability and motivation of public servants • Experience shows that Motivation is better achieved through pay predictability and reduced or non-existent discretion in determining individual salaries and by de-politicisation and reduction of patronage • PRP may distort the whole pay system of the public service by making it opaque and bureaucratic: Accountability is lost?

10. Performance Dialogue (performance appraisal*) is to be encouraged • Career planning • Assessing potential promotions • Individual training needs • Horizontal mobility • Sense of an individual contributing to the objectives of the institution * Sigma Seminar of May 06