Vilnius, 23-24 May 2006

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Vilnius, 23-24 May 2006
Seminar on civil service performance appraisal

• Performance Appraisal
• and
• Performance-Related Pay (PRP)
• an overview of OECD countries

Julio Nabais, OECD, Sigma
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• Presentation based on
• the report published in 2005 by
• OECD (Public Governance and
• Territorial Development Directorate)
• a presentation made by
• Elsa Pilichowski (OECD/GOV)

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Structure of the presentation

1. Performance-related pay in the wider management
   context key findings
2. Major trends in performance-related pay policies
3. Implementation difficulties
4. Impact of PRP
5. Lessons learned

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looking at the last century

• Pressures for changing
• Economic and budgetary difficulties
• Social pressures civil servants v. private
  sector workers a question of legitimacy of
  civil service
• Responsiveness to the citizens accountability /
  responsibility preoccupation for results a
  question of political legitimacy

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and so
from
to
Service incremental salary scales
PRP
Wide variations of degree
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1. Performance-related pay in the wider
management context key findings
An overview of the current state of play in
performance management

• Most OECD member countries report having an
  extended formal performance appraisal system for
  employee
• Attempt to link individual objectives and
  performance to institutional ones
• Continuous extension of PRP policies in the past
  decade two thirds of OECD member countries have
  to some extent introduced PRP for government
  employees
• Reasons for the introduction of PRP vary across
  countries
• PRP goes hand in hand with delegation of
  managerial responsibilities

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Relationship between delegation and link between
performance appraisal and pay in OECD member
countries
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2. Major trends in PRP policies
Trends in performance appraisal systems a
dialogue rather than a control tool

• Performance appraisals tend to rely more on
  dialogue with line management than on strictly
  quantifiable indicators
• Performance rating systems less standardised,
  formalised detailed than ten years ago
• Trend towards a 360-degree feedback system
• Quota systems for ratings are becoming more
  widespread

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2. Major trends in PRP policies (cont)
Performance appraisal criteria for assessing
performance
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2. Major trends in PRP policies (cont)
Size and form of performance payments

• The size of performance payments is rather small
  
• On average
• The maximum for top performers is less than 10
  of the base salary at the employee level
• The maximum is around 20 of the base salary at
  the managerial level
• Bonuses are tending to supplement and even
  replace merit increments
• Bonuses used in France, Italy, Spain and the
  United States (SES)
• Combination bonuses merit increments in Canada,
  Finland, Germany, Korea, New Zealand, Switzerland
• Bonuses in general higher than merit increments

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3. PRP implementation difficulties
Difficulties linked to performance evaluation

• Difficulty in assessing performance in the public
  sector due to the lack of quantifiable indicators
  
• Objectives tend to be too numerous,
  unchallenging, unrealistic, not updated
• Difficulty in differentiating the average
  performance of government employees
• Problems with detailed and highly formalised
  performance rating
• Resistance from unions, staff and middle
  management
• Costs often underestimated insufficient funds
• Time work for implementation underestimated
• Lack of preparation from line management

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3. Implementation difficulties (cont)
Managerial and contextual problems
The four missing components
Lack of valid performance appraisal process
Lack of dialogue with line management
Lack of managerial delegation
Lack of transparency
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4. Impact of PRP Key findings
Motivational incentive
Low impact
PRP
Performance
Positive effects in the right managerial
conditions
Derived effects Organisational and management
changes, new working methods and tools
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5. Main lessons learned
The design of PRP is a trade off

• Take into account the background culture of each
  individual organisation/country no best
  solution
• Team/unit PRP systems for employees should
  seriously be considered
• Associate staff/unions in the design of the PRP
  scheme
• Size and form of performance payments

Implementation problems need to be well
anticipated
Clear anticipation of the time, cost and work
that the introduction and monitoring of the
system requires
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5. Main lessons learned (cont)
The performance appraisal process is at the heart
of the whole system

• It should
• be based on well identified job objectives (small
  number, both realistic and challenging)
• establish a link between individual and
  organisational objectives
• be based on a simple performance rating
  framework, with no detailed differentiation in
  the ratings
• be based on dialogue with line management
• be transparent and rely on well established
  procedural justice mechanisms
• feedback on the appraisal should be well reported
  and explained
• Be understood in the wider management framework

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meaning that performance appraisal is basically
a process aiming to

• Provide a framework for effective management of
  the jobholder
• Clarify objectives to be met in accordance to
  organisational objectives
• Identify the appropriate competencies needed
• Provide feedback between manager and the
  jobholder
• Help personal development through training and
  mobility
• Foreseen career path
• Eventually, allows to link performance to pay.

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ACIU !
Thank you