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Cameron’s favourite think tank wants performance related pay for all public sector workers – even the army

September 4, 2012 10:04 am

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While the whole country is distracted by the government reshuffle this morning, those right-wingers at Policy Exchange have changed tack having seen their campaign for regional public sector pay stall in the face of well organised and wide-ranging opposition. Rachel Reeves has highlighted how it would undermine regional economic recovery, Northern Conservative MPs think regional pay would make it harder for to win a general election majority and Liberal Democrats are now warning of ministerial resignations if it is introduced. Meanwhile trade unions have been raising awareness in communities potentially affected and building broad alliances to pass motions in councils ranging from Cornwall to Northumberland.

The voting public think the policy is unfair and harmful for key public services such as schools. However perhaps it is little wonder Policy Exchange couldn’t convince the North of England regional pay cuts were a good idea. This was, after all, the same organisation that previously urged the ending of regeneration funding in the North saying it was ‘beyond revival’ forcing David Cameron to call his once favourite think tank’s ideas as ”insane”. And he was right.

In their new report on ‘Reforming Pay in the Public Sector’ – launched today – Policy Exchange admit regional pay is all but dead. Instead they use the report to argue for a new approach. Not only do they want every individual public sector workplace to negotiate pay levels creating huge amounts of time-consuming bureaucracy, they want them to be assessing local labour market conditions and incorporating a performance related pay for every public sector worker in the country at the same time:

‘The government must make it clear that local managers must take into account both local labour market conditions and individual performance when setting pay. In essence, this would require that pay setting would be mandated to be localist by default.’ 

The report insists there should be no exceptions – even for the armed forces, although they may be exempted from having their wages determined by ‘pay per kill’:

“For example, jobs with less easily definable targets and where intrinsic motivation may play a significant role such as the judiciary or military, may need qualitative rather than quantitative performance systems to be most effective.”

Sadly Policy Exchange don’t use any of their 111 page report to explain how these performance related pay could be developed and introduced for the UK’s 5 million public sector workers at a time when most are experiencing record job cuts. No doubt troops fighting in Afghanistan, midwives in maternity wards up and down the country and school dinner ladies in kitchen canteens experiencing pay freezes will look forward to hearing the detail. They shouldn’t hold their breath.The authors concede:

“A full costing of the budgetary implications of removing pay differentials between the public and private sectors would require a significant benchmarking exercise across the whole public sector. This would be both costly and time consuming.”

So that’s that then. Another non starter from Policy Exchange to be filed away with the time they told everyone to close Liverpool and move everyone to Oxford…

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  • http://twitter.com/KulganofCrydee Kulgan of Crydee

    If regional pay is unfair, I hope all parties get behind removing London Weighting which in essence is regional pay.

  • http://anubeon.tumblr.com Lee Hyde

    Urg! Yet more infuriating guff from a right-wing think tank. I don’t suppose this ‘report’ included any empirical evidence backing it, much less anything resembling logic to justify the enormous effort and expense it would take to implement such a scheme?

    Also, something tells me that Policy Exchange never intended such a scheme to be extended to, for example, professionalised elected officials (MPs, MEPs, etc) or their most trusted civil servants/revolving-door lobbyists. At least not in a manor that would severely reduce an MPs base pay in favour of deferring remuneration to mid-long term performance targets (which might include pay being deferred until long after their term in Parliament is up). On the contrary, I suspect that if MPs were to be subjected to ‘performance related pay’ the terms would be quite generous. With very low ‘qualitative’ expectations placed upon them, and only a modest reduction (if any at all) compensating for their potential bonus pay.

    Also,

    “The government must make it clear that local managers must take
    into account both local labour market conditions and individual
    performance when setting pay. In essence, this would require that pay
    setting would be mandated to be localist by default.”

    Call me a cynic, but that sounds suspiciously similar to regional pay. In fact, I’m going to stick my neck out and state that the above IS regional pay in all but name. I would imagine (though I have no data to hand) that the labour market is far more competitive ‘up North’ and thus the market can bare much lower wages there than it can in London and the South East. How does that not amount to regional pay?
    Of course, our darling MPs won’t be subjected to the ‘indignity’ of the ‘local labour
    market’ in determining their remunerations, because they are so few and there is no freemarket (per se) in elected offices (MPs rarely offer to work for less money, and the electorate don’t have the power to offer the job for less money as do companies advertising jobs in the labour market at large).

    Why is it that whenever public sector remunerations (pay, pensions, expenses and other perks) crops up, MPs get a relative free ride? They’re vastly overpaid, even with the recent reductions in pay and increased scrutiny of their expenses. Maybe these self-important professionalised politicos should take a look closer to home. Maybe setting their own salaries (as well as those of their most beloved civil servants and special advisor) as a multiple of the national median wage (let’s say… 1x the national median wage⸮) before relentlessly bashing the public sector at large. Failing that, they could always continue to deflect attention from the profligacy and self-aggrandisement of the wealthiest and most powerful in our society (themselves included) by proposing endless reforms to the way the public sector is managed and salaried (most of them of little-no use what-so-ever).

  • charles.ward

    “Not only do they want every individual public sector workplace to
    negotiate pay levels creating huge amounts of time-consuming
    bureaucracy, they want them to be assessing local labour market
    conditions and incorporating a performance related pay for every public
    sector worker in the country at the same time”

    Somehow the entire private sector manages do this and remain productive.  I wonder why some companies don’t scrap this “bureaucracy” and give themselves an advantage over those who foolishly review their employee’s performance and reward them accordingly.  Perhaps because performance related pay works and any company that ignored performance and paid everyone the same would find its best employees finding work elsewhere.

    I really don’t understand how anyone can be against paying people according to how well they do their job.  Can someone explain it to me.

  • markfergusonuk

    Ok, how to you put, police, army and doctors on performance related pay?

    Police – more arrests? But are we sure this won’t lead to spurious arrests for pay reasons?

    Army – Clearly there’s an issue here.

    Doctors – lives saved? Patients seen? But these metrics are complete bobbins compared to how medical care ACTUALLY works.

    • charles.ward

       Police – more arrests? But are we sure this won’t lead to spurious arrests for pay reasons?

      How about more arrests resulting in prosecutions (if the arrest does not result in the defendant pleading guilty or the CPS deciding that it should go to court then it doesn’t count).  There are lots of other ways of assessing performance for different roles in the police service.

      Army – Clearly there’s an issue here.

      Perhaps you would like to state what these issues might be.  In military operations the objectives are usually quite clearly defined (more so than in other walks of life I would imagine).  It shouldn’t be too difficult to assess performance against mission objectives.

      Doctors – lives saved? Patients seen? But these metrics are complete bobbins compared to how medical care ACTUALLY works.

      I refuse to believe that doctor’s performance cannot be judged.  Lives saved and patients seen are perfectly reasonable measures.  They are, of course, not the only measures.

      I think the problem you have is that you imagine that performance related pay is based purely on checklists and formulae.  In the private sector performance can be measured in many ways, including objective measures, peer group assessment, client satisfaction, etc.

      You seem to be arguing that performance related pay would work but performance cannot be assessed in the public sector (or at least parts of it).  This seems just as ridiculous to me as the premiss that performance related pay is a bad thing.

      Of course, ultimately the pay for an employee should be based on what it would cost to replace them with someone just as good or better.  If you are paying them more than that you are wasting taxpayers’ money.

    • Hugh

       You seem to be confusing performance related pay with commission-based pay. You do appraisals, you rely on managers – as in the private sector. Is it really impossible in the police, army and NHS to identify who is good at their job?

      As it is, the report points out that the NHS already notionally has a performance element: moving up the paybands is meant to be conditional on meeting certain standards. However, it’s not enforced, for reasons the report explores. It also points out that other countries such as Sweden and Singapore use performance related pay, so clearly it’s not impossible.

      http://www.policyexchange.org.uk/publications/category/item/local-pay-local-growth

      They may be wrong, but they appear to have thought about it and looked into it a little more deeply than your response seems to allow for.

  • Brumanuensis

    “I refuse to believe that doctor’s performance cannot be judged. Lives saved and patients seen are perfectly reasonable measures. They are, of course, not the only measures”.

    And how do you propose we adjust for the quality of local health? Setting up a measure based on ‘lives saved and patients seen’ is going to lead to box ticking and buck-passing on an epidemic scale. I thought Tories didn’t like ‘targets’?

    “How about more arrests resulting in prosecutions (if the arrest does not result in the defendant pleading guilty or the CPS deciding that it should go to court then it doesn’t count). There are lots of other ways of assessing performance for different roles in the police service”.

    Oh good, let’s create an incentive for the police to doctor evidence and arrest ‘wrong ‘uns’ like they used to regularly do. How do we adjust to take into account low-crime areas? Like in health, isn’t this a massive incentive to rack up lots of arrests and prosecutions for relatively ‘easy’ offences, at the expense of more difficult categories of crime?

    “Perhaps you would like to state what these issues might be. In military operations the objectives are usually quite clearly defined (more so than in other walks of life I would imagine). It shouldn’t be too difficult to assess performance against mission objectives”.

    Because I’m sure squaddies will really appreciate armchair generals in Whitehall hectoring them about their ‘failures’. Aside from the fact you are creating a potential incentive to commit war crimes – why bother with the rules of war when your livelihood depends on meeting a target – exactly how do we classify something like Operation Telic? Was it a success because we beat the Iraqi army or a failure due to the inability to fully control the insurgency? How about Dunkirk? Success because a large part of the BEF returned to Britain, or failure because we abandoned all our heavy equipment and became reliant on the Americans for much of the rest of the War?  

    • charles.ward

       Try reading my comment again. 

      Nowhere do I say that performance would be based solely on simple measures like suspect convictions or patient survival rates.

      But to say that measures like these cannot be an indicator of performance is absurd.  If one surgeon in a hospital has a patient survival rate of 95% and another has a survival rate of 80% for the same operation on the same type of patient I would want to know why (there may be a good reason).

      Your argument about low and high crime rate areas and the varying quality of local health are irrelivent when comparing doctors in a single hospital or police officers in a single station.

      Your argument about performance related pay leading to war crimes is just laughable.  Members of our armed forces face incredible pressures in the field making life and death decisions on a regular basis and the idea that the prospect of a little bit of extra pay will turn them into war criminals is frankly insulting.

      I believe that public sector worker performance can be assessed (not perfectly of course, and not solely by simple measures).

      If you accept that performance can be measured then I don’t see how you can object to performance related pay.

      You have constructed a lot of “strawman” methods of assessing performance but that doesn’t mean that a good method of assessing performance cannot be devised.

  • Brumanuensis

    “For example, jobs with less easily definable targets and where intrinsic motivation may play a significant role such as the judiciary or military, may need qualitative rather than quantitative performance systems to be most effective”.
     
    Qualitative? Like what? Do they want clients to get feedback forms or something (‘And how was your experience with the CPS? Did you feel sufficiently ‘synergised’?). I’m not sure I even want to know how this will work for judges – eloquence of opinions? number of references to Blackstones? most consistent use of precedents?
     
    Unsurprisingly, when the Japanese tried this, the result was:

    “Ramseyer and Rasmusen (1997) look at all Japanese judges who started work between 1961 and 1965 in order to identify key determinants of career success and the extent of political influence in the Japanese judicial system. The Secretariat grades the productivity and quality of all judges and uses this performance information to allocate jobs of greater or lesser prestige and pay. The system enables the Secretariat to reward ability and provide performance incentives for judges who begin their careers unproven and at a comparatively young age. While Ramseyer and Rasmusen do not examine whether judges respond to financial incentives, they do find evidence that judges responded to some incentives which were politically biased. The incumbent political party was, therefore, able to use the system in place to influence the judiciary without overtly intervening in the decision-making process”.
     
    I’ll just throw out there:
     
    http://www.hbs.edu/research/facpubs/workingpapers/papers2/0102/02-064.pdf
     
    http://www.hbs.edu/research/facpubs/workingpapers/papers2/9798/98-078.pdf
     
    http://www.bris.ac.uk/cmpo/publications/papers/2003/wp71.pdf
     
    http://eprints.ucl.ac.uk/14458/1/14458.pdf

  • Brumanuensis

    “But to say that measures like these cannot be an indicator of performance is absurd. If one surgeon in a hospital has a patient survival rate of 95% and another has a survival rate of 80% for the same operation on the same type of patient I would want to know why (there may be a good reason)”.

    …

    “Your argument about low and high crime rate areas and the varying quality of local health are irrelivent when comparing doctors in a single hospital or police officers in a single station”.

    …

    “Your argument about performance related pay leading to war crimes is just laughable. Members of our armed forces face incredible pressures in the field making life and death decisions on a regular basis and the idea that the prospect of a little bit of extra pay will turn them into war criminals is frankly insulting”.

    I see you’re actually advocating individual PRP arrangements. Firstly, research shows that individual PRP arragements are harmful to team morale and inhibit voluntary cooperation. Not exactly something you want to encourage in an organisation dependent upon close cooperation and high member morale. I thought you were advocating unit-based methods, which have a slightly better track record.

    Furthermore, have you considered how much bureaucracy this will entail? Are we planning on making any savings whatsoever after this gigantic exercise in micro-management or is there some sort of grand esoteric point being made here about accountability? Nothing in what you’ve said has given me any sign that you’ve thought about the effects upon staff practice. Only last night, Panorama were noting that targets for response times for ambulance crews had led to some emergencies being downgraded and other lower-priority cases being upgraded, for the purposes of meeting the response time target. I’m absolutely certain that if your proposals for monitering were introduced, we’d have a similar epidemic of re-categorising and buck-passing.

    I hate to break to you on the armed forces by the way, but they’ve already been implicated in war crimes in Afghanistan. Giving people already trained to kill other people an incentive to be even more ruthless in combat operations doesn’t strike me as a sensible approach. And would it even work? The Pentagon spent much of the 1960s trumpeting the kill rate of Vietcong forces, even as the military expedition to Vietnam become increasingly unwinnable.

    Incidentally, Dunkirk: success or failure?

    • charles.ward

       ”I see you’re actually advocating individual PRP arrangements. Firstly,
      research shows that individual PRP arragements are harmful to team
      morale and inhibit voluntary cooperation.”

      I’d like to see the evidence for this.  Individual performance assessments seem to be almost universal in the private sector and the importance of team morale and cooperation are not exclusive to the public sector.

      “Furthermore, have you considered how much bureaucracy this will entail?”

      The costs of not doing performance assessments is much higher.  As I point out earlier in the thread if performance reviews were so detrimental to a company’s bottom line then they would be rapidly eliminated by market forces.  It is telling that the opposition to performance related pay is more prevalent in the public sector where competition is largely absent.

      “I hate to break to you on the armed forces by the way, but they’ve already been implicated in war crimes in Afghanistan.”

      I notice the word “implicated” in your comment and would like to see evidence of these war crimes supposedly committed by British troops.  As I understand it the only war crimes that there is firm evidence for were committed by American troops.  I don’t think British military personnel are perfect but we shouldn’t characterise them as £100 away from being war criminals.

      “Giving people already trained to kill other people an incentive to be
      even more ruthless in combat operations doesn’t strike me as a sensible
      approach.”

      Why would you assume that the criteria for good performance would involve being more “ruthless”.  A good system of performance review would include good relations with the resident population and an understanding of, and strict adherence to, the rules of war.

      “Incidentally, Dunkirk: success or failure?”

      You seem to be stuck in the check-box culture, as I’ve already pointed out real performance reviews are much more nuanced.

      At the level of the whole Dunkirk evacuation performance reviews tend to be done by the electorate.

  • Brumanuensis

    Charles, I have gone over most your of your, frankly, extremely vague assertions, but I will note that the evidence for the problems associated with individual PRP arrangements is in the links I posted at the top of the thread.

    • charles.ward

       I’ve skimmed through the links you posted.  There’s a lot of waffle about why PRP might not work in theory but no evidence that it doesn’t.  In fact when the numbers are in it is found that PRP massively increases performance.

      Some quotes from the third link:

      “The switch to piece rates was found to cause average output to
      rise by 44%. About half of this increase can be attributed to better workers joining the
      firm and half to motivation effects. Average wages also increased by about 10%
      following the switch. Thus for a given individual at a particular firm switching from
      time rates to piece rates caused his productivity to rise by 22%.”

      “The findings show that the scheme had a dramatic effect: fine collections
      per inspection were 75% higher than in the estimated counter- factual.”

      “Teachers in the top quarter of the distribution of this statistic are awarded the bonus,
      equal to around 25% of mean teacher salary. The paper deals with the identification
      issues (namely, which schools were included) in a credible fashion and finds a
      significant impact on performance for teachers in the scheme.”

      I don’t agree that my assertions have been vague.

      1) I believe that it is possible to create systems to assess the performance of the vast majority, if not all, public sector employees.

      2) Employees’ pay should reflect their performance.

      3) This would lead to improved performance in the public sector.

      You have been desperately trying to disprove point 1 but have only been able to construct multiple bad performance measuring systems (which does not prove that good systems do not exist).

      Clear enough for you?

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