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Home > Business > Special

Performance-linked pay? Not an easy task

Business Standard in New Delhi | October 09, 2007

Pratik Deshpande (not his real name) is a privileged citizen with guaranteed rights and guaranteed pay without having to give in return a guarantee of productive work. He works for the General Administration Department in one of the Central government offices in Mumbai and is waiting impatiently for the Sixth Pay Commission bonanza.

The volume of work that his department does is an eye-opener: 700 employees, who get a combined salary of Rs 1.77 crore, clear 524 files in a month. That means the average cost of moving one file is Rs 33,800 a month. It also means that the average work output per person in Mr Deshpande's team is less than one file a month. Given this background, the Sixth Pay Commission's decision to ask the Indian Institute of Management at Ahmedabad to study a pay-for-performance model for Central government employees is more than welcome. For, it marks an intended deviation from the no-carrot-no-stick structure of paying everyone something and equating higher pay to the length of service and grades.

But will the government have the courage to implement the recommendations? Probably not. It is worth recalling that performance-related pay for bureaucrats is not a unique idea, as the Fifth Pay Commission had also suggested such a structure. But the government of the day chose to implement the recommendations on increased financial benefits, but ignored those on proper evaluation standards and eliminating 224,000 unnecessary jobs.

The Fifth Pay Commission had also suggested that the six-step executive ladder of the government, from secretary to under secretary, be shortened to just three. But such sentiments have remained on paper. For, people like Mr Deshpande ensured that the matter of downsizing the government first went to a "committee of secretaries", which, in turn, appointed a "group of secretaries" to have the last word. Meanwhile, many more have become expensive appendages in the government.

It is not that the government has not done anything to change the format of the annual performance appraisal report, but it is hard to tell what difference these will make. Consider the All-India (Performance Appraisal Report) Rules 2007, notified in mid-March. All bureaucrats above 40 years will have to focus on "officer-like qualities", which include moral courage, emotional stability, willingness to take a professional stand, behaviour with peers and juniors, etc. besides their work. What is one to make of this when chief ministers are able to transfer hundreds of officers at one stroke of the pen, and when officers are increasingly aligned with one party or the other, so that the logic of a permanent civil service is cut at the root?

Despite these very real difficulties, there is no getting away from the hard reality that some way has to be found for awarding a part of a government employee's pay in accordance with performance, and pruning excess staff. A beginning has been made with productivity-linked bonuses in the railways and postal department, but these are really departmental enterprises where output can be measured. What about something like a general administration department?

As countless examples from successful private sector companies show (variable pay is now up to 40 per cent of the total emoluments package in many companies), such a system can succeed only when the appraisal process is objective and transparent. One of the justifiable concerns of senior government officials about variable pay has been that linking salary to results is fraught with risks in a system where results are often not easy to measure, and in an environment where it is difficult to give honest assessments in annual confidential reports (no one gets a negative comment because that gives the employee concerned a right of reply, and could mean trouble for the boss). The result is a make-believe world in which every employee gets at the least a "good" rating, even though the system as a whole is worse than average.

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