By Suzannah.Brecknell

11 Jul 2012

Does the quality of your work make your time more valuable than that of your peers? Four top officials gave their thoughts on performance-related pay during a panel discussion. Suzannah Brecknell was listening

Nearly two thirds of respondents to last year’s Civil Service People Survey said they felt their pay and benefits failed to adequately reflect their performance, while a similar proportion said that poor performance was not handled well in their team. So you might expect civil servants to welcome reforms to performance management systems and the prospect of performance-related pay (PRP) – both signalled in the Civil Service Reform Plan. Audiences at Civil Service Live (CSL) were, however, split on these issues.

The reform plan pushes departments to implement the Cabinet Office’s streamlined policy on managing poor performers, and to adopt a common performance framework for all staff. Meanwhile, civil service head Sir Bob Kerslake is imposing an appraisal system on the senior civil service – which is officially managed from the centre – and will identify the top 25 and bottom 10 per cent of performers. The government is also considering introducing a “voluntary earn-back” scheme linking senior civil servants’ performance and pay.

Worries about these plans emerged at a panel debate bringing together three permanent secretaries and former cabinet secretary Lord O’Donnell. There, one civil servant noted that the banking crisis shows how bonus systems can drive undesirable behaviours, and asked the panel to comment on PRP “as it touches on the values of the civil service”. Martin Donnelly, permanent secretary of the business department, replied that some sort of PRP is now inevitable and desirable, but agreed that there are lessons to learn from the private sector – and from the banks in particular. “You can’t always tell after six months or a year how good someone’s performance was,” he said: managers should devise ways to measure not just outcomes or outputs, but also behaviours which reflect organisational values. This could be achieved through awards schemes, he suggested, as well as bonuses.

Foreign Office permanent secretary Simon Fraser said he is “pretty comfortable with the basic idea of PRP,” provided that employees have confidence in the grading system. And this is, indeed, where the problems may lie. Treasury permanent secretary Nick MacPherson noted that “a lot of effort” has gone into producing performance grading systems – and 62 per cent of civil servants in last year’s staff survey felt their performance was fairly judged – but “you always end up feeling [metrics are] slightly unsatisfactory.”

Civil servants have to accept that elements of their work are difficult to quantify, he said: “It’s the nature of our jobs that they are not so easily measured through the bottom line or return on capital, so there’s always going to be a degree of subjectivity.” He warned that the civil service can become so “obsessed with fairness” that managers “take more and more time [to develop metrics] and cause even more frustration.” Instead, civil servants must accept that “there’s always going to be a bit of a rough edge” in measuring their performance.

MacPherson had one further word of caution. While he broadly supports PRP, he pointed to work done by economist Richard Layard which demonstrates the limits of PRP’s effectiveness. Layard argues that in a team-oriented workplace, individual bonuses can have a negative effect on overall performance, as can the introduction of monetary incentives within a workforce previously motivated by pure job satisfaction and the solving of difficult problems.

If the civil service is to meet the many challenges facing it, leaders must find a way to identify its best and worst performers and provide appropriate support or rewards. But they face a big challenge in convincing staff – many of whom don’t trust performance grading systems, and remain concerned about job security – that the rewards, and the penalties, are being handed out to the right individuals.

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