Former Australian departmental chief calls for an end to performance pay

By on 04/10/2019 | Updated on 04/02/2022
Former prime minister Kevin Rudd ditched performance pay for secretaries, but the system remains in place in many departments for civil servants at lower grades. (Image courtesy: Eva Rinaldi/flickr)

The former chief of staff to prime minister Paul Keating has said he is “absolutely certain” that performance-related pay doesn’t work in the Australian Public Service (APS).

Allan Hawke – who also spent a total of seven years from the mid-1990s as secretary at the Department of Veterans’ Affairs, the Department of Transport and Regional Services, and the Department of Defence – argues in an opinion piece published by The Mandarin that performance-related pay (PRP) clashes with public service culture, destroys morale and teamwork, is subject to bias, and gives senior leaders an excuse to avoid real leadership.

In theory, PRP and associated assessments are meant to reward outstanding performers; provide employees with feedback; identify candidates for promotion; foster communication between supervisors and subordinates; and motivate employees. The system’s backers recommend that the performance-related element comprise a significant part of total remuneration; that judgements about performance be based on things under the direct control of the individual being assessed; and that leaders ensure that staff are content that the assessments and mechanisms used are fair and reasonable. Hawke told The Mandarin none of these preconditions can be assured of in the APS.

Perverse outcomes

He writes that PRP focuses on judging people rather than on providing them with feedback, adding that when judgement is the focus, “most individuals or groups will game the system and work towards optimising their take” – often to the detriment of others.  

Hawke argues that “the perverse results of such a perverse system” include creative accounting, goal displacement, withholding information, prioritising the volume of output over its quality, seeking individual visibility over collaboration, and “other gaming strategies”.

“Performance pay can lead to patronage, subordinate sycophancy, playing and paying favourites, oiling the squeaky wheel, toadyism and other inappropriate practices. Imagine the consequences of ministers being involved in the process and decisions below secretary level,” he says. 

He believes the “vast majority” of APS staff do not see PRP as operating in their interest: “The rewards (even for secretaries) are relatively small, the ranking system rankles because many good performers not given the top rating think they have been short-changed, and the system is not regarded as fair.” 

‘Abject failures’ 

Hawke has written about PRP – known in Australia as performance pay – previously, including an article published in The Sydney Morning Herald based on a paper he wrote in 2012.

In that article, he said it was his view that performance-based pay experiments in the APS had all been “abject failures in the eyes of the people affected by them”.

“Given the complexity of much of the public service, success or failure are mostly shared outcomes. That’s because responsibility for meaningful bundles of work can rarely be made coincident with individual responsibility,” he said. “This factor alone bedevils performance pay.”

In his original paper, Hawke cited the opinion of Peter Scholtes, a researcher on performance, appraisal and pay who argued that it’s wrong to focus only on individuals or groups because most opportunities for improvement involve systems, processes and technology.

Politicisation of the APS?

Hawke argues that performance pay was introduced as a “back-door way” of lifting remuneration for senior staff, because restrictive rules governing pay increases were in place at the time. 

During his time as a secretary in the APS – between 1996 and 2002 – it was decided that secretaries would be eligible for an annual 10% bonus of total remuneration for superior performance, or 15% for outstanding performance. Every 12 months, each secretary wrote a self-assessment on criteria such as meeting objectives, leadership, and adherence to the APS Code of Conduct.

He argues the harmful inference that the level of performance pay was related to whether a secretary had or had not satisfied their minister’s partisan political demands could be perceived as causing politicisation of the APS. 

“Leaders often define themselves by the issues on which they take a stand,” he wrote. “My seven-and-a-half years as a secretary in three departments of state spanned an era when performance-based pay became the order of the day — a fashion I resisted.”  

He said he “argued without success” to do away with PRP and include it in base salaries. This did subsequently happen – though only for secretaries – under prime minister Kevin Rudd, who served between 2007 and 2010 and again in 2013.

“The discussion on goals, priorities, and the nature of the minister/secretary relationship is a very positive step, as is the annual self-assessment report from the secretary and associated interaction with the portfolio minister,” Hawke said.

“Interestingly, cabinet ministers were wary that their performance and judgements were also being assessed and reported to the prime minister by the Department of the Prime Minister and Cabinet secretary, and may have tailored their comments accordingly.”

Widespread practice

Hawke acknowledges that some departments and agencies have since done away with performance-based pay for staff at all grades, but says “the practice remains widespread in the APS because so many managers believe in it… without consciously and critically analysing the assumptions behind the practice… and despite the fact that 90% of managers consider the approach to be unsuccessful”.

“In my view, there is no place for performance pay in an apolitical, merit-based bureaucracy devoted to accountability and serving the government of the day,” he argues. “The Australian Public Service would be a better place if it reverted to a practice of having the same pay range for each classification level across the service”.

He believes there is a “compelling case” to abolish performance pay and return to centralised pay-fixing, “perhaps under the auspices of the Public Service Commission”.

Hawke’s criticism of PRP comes at a time when many private sector businesses are moving to scrap formal performance reviews, according to a news story The Mandarin published on Hawke’s column.   

About Mia Hunt

Mia is a journalist and editor with a background in covering commercial property, having been market reports and supplements editor at trade title Property Week and deputy editor of Shopping Centre magazine, now known as Retail Destination. She has also undertaken freelance work for several publications including the preview magazine of international trade show, MAPIC, and TES Global (formerly the Times Educational Supplement) and has produced a white paper on energy efficiency in business for E.ON. Between 2014 and 2016, she was a member of the Revo Customer Experience Committee and an ACE Awards judge. Mia graduated from Kingston University with a first-class degree in journalism and was part of the team that produced The River newspaper, which won Publication of the Year at the Guardian Student Media Awards in 2010.

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