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Seminar on civil service performance appraisal. Vilnius, 23-24 May 2006. Performance Appraisal and Performance-Related Pay (PRP): an overview of OECD countries. Julio Nabais, OECD, Sigma. Presentation based on: the report published in 2005 by OECD ( Public Governance and

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Vilnius, 23-24 May 2006

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Vilnius 23 24 may 2006

Seminar on civil service performance appraisal

Vilnius, 23-24 May 2006

Performance Appraisal

and

Performance-Related Pay (PRP):

an overview of OECD countries

Julio Nabais, OECD, Sigma


Vilnius 23 24 may 2006

  • Presentation based on:

  • the report published in 2005 by

  • OECD(Public Governance and

  • Territorial Development Directorate)

  • a presentation made by

  • Elsa Pilichowski (OECD/GOV)


Structure of the presentation

Structure of the presentation

  • Performance-related pay in the wider management context : key findings

  • Major trends in performance-related pay policies

  • Implementation difficulties

  • Impact of PRP

  • Lessons learned


Looking at the last century

…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


And so

…and so…

from…

to…

Service incremental

salary scales

PRP

Wide variations of degree…


1 performance related pay in the wider management context key findings

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


Vilnius 23 24 may 2006

Relationship between delegation and link between performance appraisal and pay in OECD member countries


2 major trends in prp policies

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


2 major trends in prp policies cont

2. Major trends in PRP policies(cont)

Performance appraisal: criteria for assessing performance


2 major trends in prp policies cont1

2. Major trends in PRP policies(cont)

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

Size and form of performance payments


3 prp implementation difficulties

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


3 implementation difficulties cont

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


4 impact of prp key findings

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


5 main lessons learned

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


5 main lessons learned cont

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


Meaning that performance appraisal is basically a process aiming to

…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.


Vilnius 23 24 may 2006

AČIŪ !

Thank you


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