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Performance based pay in the Australian public service
Employee performance is one of the important factors that modern day managers have to consider for propelling their company towards success. These days, companies have become more resource centric and it is essential to blend the best HRM practices to reach organisational goals. People are important assets for any company and managing their performance thus becomes a key value driver for attaining those goals. The firms in the service sector need to ensure that they lay emphasis on employee performance and develop them in a better manner.
The report aims at analysing the effects of the performance based pay system that was implemented in the Australian Public Services. It analyses various events in a step by step manner so that various flaws are easily understood. The report also helps us in analysing mistakes that are normally committed and at the same time enables us to identify the best practices in the industry.
Enough discussion has already been had on the companies whose productivity levels shot up after the inclusion of performance based pay, but very little discussion has taken place on organisations who suffered due to merit based pay. The Australian Public Service is one of the classic cases in which performance based pay was not able to motivate the employees. Therefore, I decided to take this up as my topic of study.
2.0 基于绩效的澳大利亚公共服务支付Performance Based Pay in the Australian Public Service
Negotiations for having a performance based pay system have been going on between the Department of Industrial Relations (DIR) and public sector unions since the late 1980s. Later on further negotiations took place in enterprise bargaining agreement for the Australian Public Service late in November 1991. A basic frame work for the guide lines was formed after this point and, in 1992, performance based pay came into force in the Australian Public service (Wright, 1995). Even though the frame work was acceptable to many it was not to the taste of the Australian Industrial Relations Commission as they said that this scheme was not compatible with the existing rules and rates that existed in the public services. Eventually after long negotiations across various bodies it came into force on December 4, 1992 and was drafted into the Australian Public Service Work place bargaining agreement. This was signed by both the Labour Government and Public Sector Trade Unions (Department of Industrial Relations, 1993c). This agreement made the agency heads responsible for determining the band of pay and the levels of merit pay to be made to senior officials and senior executive services. They were required to follow the guidelines of performance based pay as per DIR. Agencies were expected to avoid forcing the rule as it was expected to spread itself over a period of time across all the institutions. This was specifically done so as to avoid the resistance from the employees to any such changes in the system especially when it is related with that of their pay package (Wright, 1995).
Bonus payments were the main part of the bouquet of benefits that were there. A budget supplement of more than half of the maximum pay for each official who are eligible under the scheme funded this performance based pay (Geary, 1992). The bargaining agreement in 1992 allowed all these performance bonuses to be pooled down into a fund which may be used for the increase in pay of all workers and at the same time improve the working condition using them. Most of the public service organisations started working on the same and initial payments of performance bonuses were made in 1993.
3.0初始阶段评价 Evaluation of the Initial Phase
After this first round of pay took place, an inquiry was set up to take a look at various plans that were implemented by the Senate Standing Committee on Finance and Public Administration. This inquiry raised many concerns such as lobbying and the politicization of office circles, absence of objective measures to divide people into various bands based on their performance and various other issues that were beyond the control of the agency heads (Considine, 1990). Many critics were of the view that such a system would reduce productivity, as it basically was divisive in nature. Furthermore, the way in which the structure was forced into the system when they lacked sufficient administrative resources rendered it ineffective.
Difference in work cultures across the organisations and the change into a frictional system were pointed out as the reasons for the initial glitches that took place in the system. Gary Johns, The Minister of Public Administrations, called for a major cultural change in the organisations so as to make this a success. Government was busy brushing the issues under the carpet by mentioning to the "newness of the scheme" and "speed of execution" with which the employees and the agency heads could not keep up with. However DIR agreed that many officials were paid almost the same amounts during the initial phase irrespective of the ratings that they got. According to DIR: "Clearly, such approaches can give rise to perceived inequities and charges of unfair treatment following moderation that results in a lower performance bonus and rating." (1993a: 22) DIR conceded that during the initial stages of performance-based pay a number of agencies had struggled. Later, in order to avoid any further problems in implementation due to the lack of administrative resources, DIR ordered all the officers to be paid at similar levels irrespective of the levels that they achieved at least during the early stages until operational stability is effectively drafted into the systems.
A memorandum was formulated by three agencies (Department of Finance, Public Service Commission and DIR) to weed out the problems that arose from the initial framework. They agreed that the change which was brought into the system was indeed complex and difficult to execute (Department of Industrial Relations, 1993b). They also found out that the number of people eligible for performance based pay was much higher (about 90%) which was too high a number and the agencies did not have a system in place to differentiate between performers and non performers. They also found that the 5 point scale that was suggested at first was not used across all departments, leading to dissatisfaction among many workers as they felt that they were not being judged on the same platform as that of others in the system.
The memorandum tried to address most of the concerns that were pointed out in the initial phase and new guidelines were set up which aimed at reducing the complexities in the process later on (Stewart, 1996). Shortcomings in the moderation process were overcome by having a discussion between moderators and immediate supervisors before rating the employees. It also said that the initial scores were just a preliminary to give an idea where the employee actually stands and may change later on after the moderation process. The subjective nature of the rating process was another major flaw that was observed and in order to overcome this, it required solid quantitative measures to evaluate the employees.
DIR suggested that the ratings should be spread out to make sufficient differentiation between the different levels so that the employees are motivated to work better to achieve better ratings. They said that it was the responsibility of the agency heads to ensure that there is visible difference between different bands and the method in which they would be analysed should be made known to the employees to avoid any ambiguity. Moreover, the number of people eligible was made less than 805, with less than 40% entitled to get 'high performance' rating. This was done in order to improve productivity by means of competition (Department of Industrial Relations, 1993a).
4.0 绩效协议与绩效为基础的薪酬Performance Agreements and Performance Based Pay
Performance appraisal was the factor that held the performance based pay system in the Australian Public Service. It was through performance appraisals that the corporate goals and communication goals within the organisation were tied to the pay structure. Training needs of senior officials were also identified by this process and gaps in the system were analysed. It was a method of deciding the performance appraisals and bonuses at the same time providing a stick to threaten the under performers. By making only 40% eligible for the highest rank, a sense of competition started taking place in the system. This was never seen before as the employees of the public services believed that they would be paid equally no matter how hard they work (Gomez-Mejia, 1990). Thus the system was able to change the mindset of the employees in the first place.
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