Headlines: February 7th, 2000

Publication of a report on performance incentive schemes is the first step in seeking to create a performance culture in the Civil Service. The study team was led by John Makinson, Group Finance Director of Pearson plc and sponsored by the Public Services Productivity Panel. Their remit was to look at incentive schemes operating in Benefits Agency, Customs and Excise, Employment Service and Inland Revenue. Collectively the agencies employ over 200,000 people, the majority of whom earn less than 20,000 pounds a year.The team found that there was no performance culture and that current incentive schemes are ineffective and discredited. Schemes rely currently on subjective assessments, because there is virtually no hard information about the performance of individuals.

The recommendations, which are to be carried forward on a pilot basis, envisage a team based reward system, rather than basing rewards on the performance of individuals. There should be a bonus opportunity for staff to receive a reward of at least 5% of basic salary. Incentives should relate to targets already embodied in the Public Service Agreements of the agencies, with junior staff working to not more than five targets and more senior staff not more than eight. The package should include financial and non-financial targets with the goal of yielding improvements in both customer service and productivity.

Funding of bonus payments has inhibited schemes in the past and to overcome this problem it is recommended that the Treasury should be ready to share the benefits of financial achievement with agencies. In addition, extra funding should also be released for better targeted service delivery and overall performance, not just for making cost savings.

The underlying arguments on which the recommendations are based conflict with research carried out by the Public Management Foundation. In ‘Wasted Values’ published in October 1999 evidence was put forward to show that public and private sector managers take quite different views of incentive schemes. For this reason it was claimed that borrowing techniques from the private sector and implanting them in the public sector was unlikely to be effective.