First of all, I wish to
draw it from example of Good Governance in Singapore :
The economic success of Singapore
is strongly driven by a government that is heavily involved in a number of key
sectors and industries, and which is perceived as one of the least corrupt
in the whole world, ranking fourth only behind Denmark, Finland and New
Zealand in 2007. Like in most other countries, belonging to the civil
service is a source of pride and prestige in Singapore.
v The government has consciously followed a stringent
business-like approach to cultivate and nurture the civil service, to ensure
that it has the best talents to drive the country forward. Government
continuously analyses the service delivery needs of the country and the
emerging global trends, reforming the civil service according to such needs and
trends.
v Public servants in Singapore receive very
competitive salaries, rivalling even the private sector. This is complemented b
a merit-based personnel assessment system supports civil service performance
management and provides incentives, including promotion and performance
bonuses, for good performers. Economic performance is likewise linked to
civil service rewards, i.e., civil servants could receive bonuses of up to
twice their monthly salaries during periods of good economic performance.
v In addition to providing a relatively high salary
structure for the civil service, the government has exhibited strong political
will to combat corruption through the introduction of stringent administrative
and legal measures to support the anticorruption law, empowering the
independent Corrupt Practices Investigation Bureau (CPIB) to prosecute corrupt
officials, and promote ethical leadership by example.
Singapore public services[1] give us
a good example where such incentive systems have been successfully implemented
to the benefit of all concerned, if
we compare this model of governance with Indian bureaucratic setup, we will see
that In India, we have:
- · Fixed salary structure and job security with almost nil incentives for good performance
- · Very weak anti-corruption mechanism.
As
a result, large number of Indian public servants are either lazy & inefficient or
working for perverse incentives.
Hence, It is clear that
sprucing up the anti-corruption wings in sync with the handing out of
performance based financial incentives would be a far more effective deterrent
to combat the perverse incentives. In attached paper, I am suggesting principles
for designing Incentive structure for Central Government Employees.
Incentive Structure for
Public servants
The era of the aware citizen who clamours to be
treated as the client has well arrived. She is no longer concerned merely with
the lofty jingoistic ideals or the pan-national issues, but also with the
closer at home local issues of a well run administration and good governance.
She demands value for money (read taxes) and is unrelenting in her appraisal.
The change in a political power in India is a case in the point, but surely not the only
one. The state needs to respond with a major revamp in the public service delivery
systems. It will not suffice to merely alter the perception; a concrete and
perceptible change will be called for.
This paper highlights that performance measurement
and productivity linked incentive system is one such measure. This measure can
be easily implemented for the government employees as it does not require the
co-operation or participation of actors outside the governmental machinery. An
objective and transparent system of performance measurement linked to
incentives for good performance will help tackle two of the most prevalent ills
plaguing the various public service delivery institutions – apathy and
corruption.
Apathy is a subtle but powerful hindrance to
efficient and effective delivery of public services. In the absence of a system
which allows differentiation between outstanding performance and poor
performance, there is little incentive for even those individuals capable of
good performance to excel. There is no recognition or reward for excellence or
innovativeness. This leads to a gradual degeneration to mediocrity and status
quo and the institutions are reduced to being a milch cow for those with
perverse incentives – monetary or others.
Corruption is touted as
the one of the most prevalent evils plaguing our society today. Further, the
public servants are unequivocally pinned as the chief perpetrators of this
evil. Public servants are termed as inefficient, lazy and corrupt in India.
Common public sees it as a reflection of national character in India. A British
Viceroy who once said "Every citizen of India is corrupt" is often
quoted. The issue needs to be analysed in the right perspective.
To understand the
reasons of corruption and inefficiency in Indian bureaucracy, we have to
study the social and governance structure in India. The following
parameters have been chosen here:
1. Power Distance
Low vs. High
Power Distance - the extent to which the less powerful members of institutions and organizations expect and accept that power is distributed
unequally. Citizens of low power distance countries like Austria, Australia, Denmark, New
Zealand etc, expect and accept power relations that are more consultative or
democratic. People relate to one another more as equals regardless of formal
positions. Subordinates are more comfortable with and demand the right to
contribute to and critique the decision making of those in power.
In High
power distance countries (e.g. Malaysia, India), less powerful accept
power relations that are more autocratic and paternalistic. Subordinates
acknowledge the power of others simply based on where they are situated in
certain formal, hierarchical positions.[2]
Due to high power distance in India, the rich and powerful, try to and
often are able to get preferential treatment from public servants by granting
favours - monetary or material, which the poor simply cannot afford to. Authority
of public servants to exercise discretion or delay the work is no challenged by
poor people due to high power difference.
2. Per capita income
Per capita income is reflective of prosperity of citizens. A larger per
capita income is often linked to a greater awareness of the rights of a citizen.
Aware citizens demand better service. In country like India where 30%
population lives below poverty line, awareness of the rights is very poor. Therefore, citizens are not very demanding of
good service from public servants.
3. Incentive structure for
Government/Public servants.
The most important motivation for an average employee to work and excel
is a well structured and performance linked incentive structure as has been
emphasised by Taylor as far back as the 19th century. For long, it
was presumed that Public service, by its very nature, was not amenable to
Performance measurement due to the complexity of the tasks performed. The
‘output’ is complex; variable across sectors; involved multiple actors
including the citizens for its effectiveness and invariably involved a time lag
between the efforts put in by an individual Public servant and the final
manifestations of those efforts. As such, it was not possible to measure
performance or design any concrete financial incentive structure to motivate
the good performers. These ideas are no doubt obsolete now and a step forward was
proposed through the introduction of the idea of performance-linked pay in the
Sixth Pay Commission.
Is it true
that there is little which can be done is short run in respect of the Power
Distance and the low per capita incomes? Do we have to wait for India to become
prosperous before becoming honest? Some economists like Prof Sebastian Morris
(IIMA) point out that corruption was rampant in public service in US in 1900’s
which slowly got reduced with the rise in per capita incomes and decrease in
power gap.
While we are
waiting for these changes in the society to come about, there still is a great
scope for improving the governance and Public service delivery. This
improvement can be brought about through a well structured incentive structure
for the personnel involved in delivering these goods to the public. This will
improve the public service delivery system through a two fold effect – motivate
the good performers to excel by reducing apathy and penalise the
non-performers. However, there always remains the issue of perverse incentives
for the “good” performers.
Incentives for a public servant
We will
first examine the existing incentives for a Public servant and later in this
paper, the incentives that might come into existence with the implementation of
Performance-linked pay. Let us first look at the existing incentives for public
service:
2. Stability of job
3. National service
4. Honour and recognition
5 Perverse incentives
Out of these
factors, In view of the perceived Power gap and low per capita incomes,
financial need and stability of job is the strongest factor for entering into
government service and remains so throughout the career in India. We can see
that during present times, large percentage of people joining public service
are from rural areas since public servants are perceive to wield power.
National
service feeling was very strong at the time of independence but it got weakened
with time. This weakening could also be attributed to the rise of corruption in
Indian society.
Honour, Respect and Recognition is still very important to public
servants. There are examples of many outstanding public servants whose primary
incentive was recognition for example Mr ShreeDharan of Delhi Metro, most of
our armymen. However, this incentive is weak or not available for many public
servants, who are perceived as corrupt by our society.
In the present era on increasing commercialisation, aspirations are
rising and so are the costs of living. It is a common joke that government
employees treat salary as pension for which no work should be performed. There
are cases where a government employee practices business/ agriculture as a
second profession.
A constant
comparison with the emoluments in the Private Sector further leaves the Public
Sector employees smarting and longing for more. This factor often pushes even
the fence-sitters to give in to the perverse incentives. An incentive structure which takes care of these financial aspirations
by linking them to good performance may just be the answer to efficient and
effective Public service delivery systems.
Designing an incentive structure
A well
designed incentive structure presupposes a comprehensive and dynamic
performance measurement system. Performance parameters should be clearly
pre-defined, dynamic and aligned with the overall objectives of public
organisation. It would be necessary to ensure that the quality of output does
not suffer at the altar of quantitatively defined output targets. These
measures would vary with the ultimate goal of the Public organisation and
require in-depth deliberations that are beyond the scope of this paper.
To ensure efficient delivery of public services, many reports have been
made and commissions have been set up. The recommendations are mostly focussed
on CR as tool of motivation. In as much as the negative incentive of a bad CR
exists, this system generates alignment with the goals of the superiors rather
than that of the organisation. While the system is hardly ever questioned, the individuals
are routinely blamed for failures, while fixing the responsibility.
An effort to
implement the annual CR based performance linked pay may be an effort in the right direction.
However, this system has certain shortcomings which need to be re-looked at
before implementation. It reinforces the existing bureaucratic hierarchy. It is
quite likely that merely defining an annual increment on basis of annual
confidential report would make lower officials toe the line of higher
officials.
Therefore,
if there is any error/perverse incentive at any point in chain, the entire link
below it would be working for that perverse incentive which is at a variance
from the organisation objectives. There would compliance with the wishes of
the superior to ensure a favourable CR and thereby the annual increment.
Thus, it can be seen
that the proposed CR/APAR based incentive system may not be much better than the present
system. The aberrations never get corrected because of the high power distance.
The subordinates rarely ever question the directions given by the superiors.
There is little debate over the propriety of the goals set. The dissidents
usually get cast aside and a more pliable individual is put in place instead.
Output based Variable Incentive system:
This
paper puts forward the hypothesis that a slight modification in the performance
linked pay may help in better alignment of the goals of the individual at every
level with that of the organisation. The financial incentive structure might be
far more effective if it is variable across levels of hierarchy within the
organisation. The reasons for advancing this hypothesis are discussed in detail
below
Incentive structure for leaders
The Executives at the uppermost levels have the greatest potential to
impact the degree and quality of the goal achievement of an organization, with
even a small individual decision. Therefore, an individual incentive at this
level may be far more effective for the organisation rather than group
incentives. It is also necessary that the incentive system begins with the
alignment of the incentives of top executives/ functionaries with the short and
long term goals of the organisations/ departments to minimise the possibility
of distortion at lower levels.
We can take a look at some of the excellent systems within some Indian institutions
such as the IIT and the IIM. These systems appear to have been reasonably
successful. Despite being manned by the ‘government employees’, these
institutes are performing and earning accolades worldwide for their
professional competence and quality output viz. meritorious students who go on
to achieve distinction not just within the country but worldwide.
A good incentive system is one of the reasons for the consistently good
performance of these institutes. In addition to the fixed baseline salary, the individual
faculty has the incentive of extra income through consultancy, foreign visits
for presentations, and promotions on basis of publications. These incentives are
entirely dependent on the efforts and merit of the individual and spur them to
excel themselves in their respective fields. In light of these examples, it can
be argued that granting a part of the salary as an incentive based on output
can be an effective method to boost individual productivity.
While it may be possible for the Public Sector Units to have profit
sharing arrangements for top executives a private sector; it would not be a
feasible option for the service departments. There have been debates and discussions on the feasibility of measuring
the output of the Public service delivery Institutions. It is often argued that
the output is varied, complex and dependent on multiple actors and varies with
the socio-cultural context. These are facts which need to be appreciated and
factored in for designing incentive system. This job can be entrusted to a
consulting firm.
Incentives for lower functionaries
Lower functionaries also need to be incentivised for better
effectiveness. A common problem in government departments in India is
very low efficiency and effectiveness of lower officials. The non financial
incentives at lower functionary level are also not very high so as to motivate
the individuals. A measure to overcome
this problem could be defining financial incentives for the group output. This
would ensure that a combined effort is put in through peer pressure to achieve
the set goals. Besides, it would also bring down the need for individual
supervision, which in any case has proved far from effective. A successful
example of such a Group incentive scheme can be seen at the Railway Workshops.
The incentive scheme was designed by consultancy firm M/s RITES after
performing work study in the workshop.
Railway workshop, Bhopal
The Group incentive
scheme for workers and supervisors at railway workshop Bhopal is based on the
number of coaches overhauled in the month. The incentive per person per month
at the maximum level is about Rs 2000-3000 which is less than 10% of the salary.
Nevertheless, it drives the effort of every group towards generating the maximum
possible final output.
Advantages:
1.
Worker work towards
solving problems like machine failure, material shortage, absence rather than
making it an excuse for not working. The solution finding mode kicks in.
2.
Absenteeism is quite
less as incentives are based on the effort made in group based on number of
hours also. Thus, the throughput as well as the output is being measured and
peer pressure keeps absenteeism to the minimum required without any external
monitoring.
3.
This has reduced
industrial unrest problems like ones present in many other railway workshops.
As the productivity is being rewarded, it gives a feeling of control and
energies are directed towards maximising production.
4.
Output of the workshop
increased by more than double after implementation of this incentive scheme.
Anti-Graft machinery
While common public is supporting the Jan Lokpal movement but government servants are scared of this Lokpal as more questions are being raised in integrity of anti-corruption agencies than the public servants e.g in present case of Augusta -Westland deal. There are questions on integrity of present Vigilance/Police/CBI. A stronger incentive structure needs to be framed for anti-corruption wing that is entrusted with task of taking action against the corrupt.
Conclusion:
The financial incentives based on an objective Performance appraisal
system, flawed though it may be in some respects, will nevertheless be a step
forward from the current status. It will be not an exaggeration to surmise that
till such time as the altruistic goals of selfless service suffuses the Public
organisations; an incentive system – financial or otherwise – based upon a
dynamic performance measurement system will have to be set in place to ensure
effective and efficient delivery of public services.
One option can be that every government employee is permitted to upto 50% of annual salary as Performance Bonus based on targets achieved.
Bibliography:
1. Hans De Bruijn, Managing Performance in the Public Sector, 2007, 2nd
Edition.
[1]
Robert Bernardo. The Role of Incentives in Civil Service Reform: the Singapore Story.
Downloaded from http://regionalcentrebangkok.undp.or.th/practices/capacitydevelopment/documents/Evidence_from_the_field_series_Singapore_Civil_Service_Reform_through_Incentives_-_formated.pdf
[2]
Geert Hofstede. Hofstede's Framework for
Assessing Culture. Downloaded from http://en.wikipedia.org/wiki/Geert_Hofstede#Hofstede.27s_Framework_for_Assessing_Culture
