Performance management pay system under the microscope

Samisoni Pareti
Scrapping the government's new performance-based pay system is no longer the question now facing the Public Service Commission. It is more to do with how much the so-called performance management system (PMS) will cost taxpayers because of yet another high profile bureaucratic blunder.

CEOs' consult...PSC CEO Anare Jale and Women Ministry CEO Emele Duituturaga speaking to the media.

PSC's chief executive Officer Anare Jale confirms exclusively to FIJI BUSINESS late last month that the much taunted performance management system (PMS) is on its way out, no more than a year after its introduction.

Two reasons had been offered for the axing of PMS-last month's permanent arbitrator's ruling on the payment of Cost of Living Adjustments (COLA) to civil servants is one of them.

“I'm working on a paper to go to cabinet to give cabinet ministers all the information on the implications of the recent decision of the permanent arbitrator and suggest a way forward,” Jale told this magazine.

“But personally, I feel PMS is going to be stopped. We will not go ahead with PMS.”
Jale says government's intention was clear well before submissions on the confederation of public service unions' 2004 demand for a 5% across the board payment of COLA to the permanent arbitrator began.

Jale says government can only afford to pay PMS, not both. “Unions claim they still need COLA. But our stand was no COLA but PMS.

“Now since the arbitrator has ruled in favour of COLA, the government has to reconsider its position as far as PMS is concerned.

Public Service Commission headquarters.... at Berkely Crescent.

“It's going to be a big financial burden for government to pay both. It was made very clear at the hearing before the permanent arbitrator that government cannot afford to pay both. If he rules in favour of COLA, that means government will have to re-consider its stand on PMS.”

This, however, will not affect CEOs who come under the senior executive service (SES) programme.

Jale said SES is a contract between PSC and each CEO and changes would only be made through the agreement of both parties.

So who is to be blamed for yet another public bureaucratic policy that went terribly wrong?
Jale's colleague in the office of the prime minister, Jioji Kotobalavu, knows exactly where the fingers should point.

“The government representing the public's interest, the interest of taxpayers and the public at large is right in asking the PSC, 'what is happening?'” Kotobalavu told FIJI BUSINESS.

“No, this elected government cannot be blamed because it is the PSC that is coordinating and driving the reforms.”

Another senior civil servant, well versed with public sector reforms and its PMS project, was more condemning of the way PSC mishandled the changes.

“The problem I believe is not so much the cost but competency level of officials at PSC to come up with a workable and cost effective formula,” the civil servant who spoke on the basis of anonymity said.

This civil servant said incompetency was shown in the way PSC was unable to introduce the right PMS formula both at SES and non-SES levels.

Jioji Kotobalavu... questions competence of PSC officials.

As a consequence, PMS became an exercise that turned “negative and condescending” for CEOs, while costs ballooned to astronomical proportions for middle and junior level civil servants.

A recent World Bank report put possible cost of civil servants payment under PMS at between F$25 million to F$45 million.

General Secretary of the Fiji Public Service Association Rajeshwar Singh's favourite example of PMS gone wrong is the Ministry of Education's total bonus and increment payment bill of $18 million, which is 42% more than the F$12 million the Ministry of Finance budgeted for PMS payout for the entire civil service of 29,000 employees for 2005.

In the past, competency at PSC was resolved by way of hiring consultants mainly from abroad. But this link was severed when the new PSC chairman, Stuart Huggett, took office at the beginning of the year.

He froze the hiring of overseas-based experts. While the intention was good, Huggett's order backfired on the commission. It meant, for instance, that CEOs would be assessed under PMS by commissioners who were “part-timers” and assisted by PSC staffers, creating an unprecedented development of junior employees assessing their own bosses!

“On another point, I cannot fathom how PSC was allowed to go free when it caused the big blunder with the nurses' pay which led to a strike. Nobody however has been brought to task,” the civil servant said.

“I believe CEOs and some right-thinking people should now begin to question some of the decisions taken at the hill at PSC and Finance.”

Kotobalavu reckons the lack of skills to critically analyse nice-sounding foreign concepts at Berkley Crescent contributed to the downfall of PMS. He believes PSC did not carefully study the suitability of PMS before introducing it in January 1, 2004.

“I hope we've learnt from the experience and in future thoroughly study concepts we get from overseas before we decide on local application.”

Jale was not asked to react to Kotobalavu's conclusion. But he seemed ready to take on the criticisms.

Jale believes the massive change at PSC-which saw a new chairman, several new commissioners and a new set of senior managers- introduced soon after PMS was implemented could have taken its toll too.

“We'll take all the criticisms that come our way. The commissioners at that time have moved on, the senior management of PSC were different then, we have a new group there now.

“I'm not trying to disassociate myself because I'm a newcomer. But if I go into somebody else's shoes, then I'm bound by the rules and agreements that may have been signed.”

Jale may have been the implementor of a system he didn't conceive, but no one in government could claim it was not given ample warning.

One of the early signs came in the form of a letter addressed to the Prime Minister, as minister responsible for PSC, from the main public service union, Fiji Public Servants Association, in May 2004, just four months into the implementation of PMS.

After complaining at the way PSC seemed to have bulldozed through the changes, the union told the Prime Minister: “We are aware that the term of the chairman of the commission (Sakeasi Waqanivavalagi) is now finally drawing to a close,” Singh wrote.

“It appears that in his zeal to make a departing impression, he has chosen this style of approach to a very important subject.

“If the contemplated changes are put into effect arbitrarily, then we are afraid it would have a major and adverse effect on the rest of the process of the review of the civil service structures and grading.”

Singh received no response to the letter, not even an acknowledgement.

PMS came under close scrutiny in a World Bank report released in September. “The PSC, like other parts of government, has tended to develop and implement concepts without the strong involvement of stakeholders such as other ministries, trade unions and civil society.

“There has thus been poor ownership of the civil service reforms by ministries who feel the reforms have been centralist,” the World Bank report says.

So what's wrong with the PMS formula?

As the longest serving CEO and permanent secretary in government, Kotobalavu listed several factors:

 Difficulty of measuring output of a government department or ministry as opposed to the private sector's widely-accepted performance assessing instruments of profit and share value.
 Failure to recognise cultural factors. Fijians tend to be modest when it comes to “self-assessment” Kotobalavu argues.
 Its transparency concept whereby the employee must see his or her assessment report can easily generate bad will, not goodwill.
 Divisive bonus system as it only rewards the CEO when performance in any government ministry of department is the result of team work, not solo effort.
 Inability of PMS to maintain the purchasing power of salaries and wages.
 PMS does not assess the quality of work done, but merely concentrate on volume, compliance and output.
 Complexity and scale of work done by ministries not recognised, so a ministry of 8000 employees with a $260 million annual budget like the Ministry of Education shares the same measuring barometer as other smaller departments.

For Isikeli Mataitoga, CEO at the Ministry of Foreign Affairs and External Trade, it was like comparing “apples with pears.”

He believes the assessment system would only be fair if it recognises the inherent differences in each ministries and departments.

At the Ministry of Foreign Affairs for example, 80 percent of its work is done overseas at Fiji's offices abroad. This means that more than three quarters of its work and cost is dictated by foreign agencies like the United Nations and the European Union, something the Ministry of Finance and PSC have difficulty appreciating.

In addition, heads of foreign missions are political appointees, yet Mataitoga is being assessed on how his diplomats perform overseas.

This is not to say the former director of public prosecutions and solicitor general is anti-PMS.

He believes any system that will lift productivity and efficiency in the public service ought to be encouraged.

Kotobalavu agrees, saying the onus is on PSC to bring about a better performance measuring formula. “We need to recognise the differences between the private sector and public service because with the private sector, you can make a judgement based on the profitability of the company and the value of its shares.

“Public service is a service organisation, how do you measure its performance?”

In stating that, Kotobalavu strangely enough was echoing what Singh and his public service union group had been stating all along: that PMS, in the form advocated by the PSC, was more applicable to the private sector, not government service.

“While PMS may have a legitimate place in the modern business and management world to encourage greater efficiency and productivity, it must not be the sole criteria.

“This is especially so in the public sector where a profit-driven or bonus payment is inapplicable and cannot be compared to private profit-making enterprises.

“The whole of the public service cannot be operated solely as a commercial entity, based on rules of competition and reward.

“The public sector is not the private sector and the distinction needs to be maintained. The unions carry that message and mandate from its rank and file.”

Boosting the unions' case had been the pointed remarks of the World Bank on public sector reforms, PMS, in particular.

It questioned the attempt to link performance pay to cover cost of living adjustments annually and wondered about the cultural implications of the system.

“Linking pay to performance for annual pay to cover cost of living can be very divisive,” the report said.

“The presence of pay may or may not motivate an individual to perform (especially in the context of public service ethos), whereas the removal of pay or low pay is a definite de-motivator.”

“The benefit of performance pay is that it focuses on objectives. However, at non-SES level, given our culture and the close social and work ties, it is unlikely a truly fair system can operate at this level, and the pay distribution rather than being normal or bell shaped is likely to be skewed towards acceptability which will increase the wage bill further.”

The World Bank endorses introducing PMS for CEOs, but it believes PMS for the rest of the civil servants can be costly and cumbersome.

“It will be unrealistic to link objectives for non-SES grades where their work is often routine and highly controlled.

“Further, it will be extremely time consuming to administer objective-based performance agreements for all staff, especially as they are linked to pay.”

For Jale and his team at Berkley Crescent, the way ahead might include dropping the PMS pay structure but adopting its principles.

“I think what we may do is to continue to have the principles embodied in PMS but remove the reward aspect.

“I think that is a way we can go, remove the reward aspect but take on board the other principles of PMS.”

Kotobalavu suggested having a smaller but full time public service commissioners as an alternative.

He said New Zealand did this when it introduced PMS. The World Bank seems to be advocating such an idea as well.

“Consideration should be given to setting up a public service department or efficiency unit in the Prime Minister's office which undertakes the role of efficiency development, quality management, training delivery and co-ordination, development and implementation of human resources policies and practices.

“The PSC should be more independent, possibly reporting to Parliament, but serviced by a small team to ensure oversight of fair play in recruitment and anti-corruption issues.”

On PMS as a pay system for civil service, the World Bank does not believe PMS will enable government to improve productivity and reduce the wage bill from the current 11% of Gross Domestic Product to the preferred 9%.

The way forward it suggests is retaining PMS only for CEOs, while other senior civil servants and middle and junior staff members continue to be paid through COLA. Ultimately, the better option the World Bank recommends is putting CEOs under performance pay, middle and junior civil servants on COLA, and other senior executives (deputy secretaries included) getting a mixture of PMS and COLA. The COLA factor, the bank said is needed to “cover any unfairness.”