May 01, 2012

The Carrot and The Stick

People working in the private corporate sector are familiar with the process of annual appraisal and know that annual increments and bonuses are directly linked to this exercise. There may be some disappointment with the way that these appraisals are conducted but (a) no corporate has found an alternative to the process and (b) despite all its faults, companies have not collapsed and died because of appraisals -- in general they have done well. Net-net this means that the strategy of deciding on annual increments and bonuses on the basis of an appraisal process has stood the test of time and reliability in India.

Strangely enough, this concept is totally absent in state and central government departments and institutions. The salary structure for all government employees is determined by the Pay Commission and both pay and annual increments are cast in stone. So there is no direct and transparent way to recognise good performance and reward the same. Neither is there any way to identify incompetent and lethargic behaviour and hand out any punishment -- unless we consider extreme cases of criminal or illegitimate behaviour and invoke disciplinary measures. This means that unless a government employee commits a culpable crime there is no way that he or she may face any action. This also means that one can get away with doing nothing in office much to the consternation and dismay of those who try to put in an honest days work and achieve results.

Is there a way to break out of this terrible situation ?

Obviously a total solution to the entire problem involving lakhs and lakhs of government employees may be too big to solve -- so let us break it down to a more manageable limit. Let us allow individual departments and institutions to address the problem at the local level. Consider a college or institute whose faculty salary has been decided and cast in stone by the 6th Pay Commission. Obviously the base pay is too sacrosanct to tamper with as it will have parity implications across a whole range of equivalent organisations. Can we do something locally ?

Continuing with the example of a college, we can segregate the faculty into the three strata -- professor, associate professor and assistant professor -- where persons within each stratum will have roughly similar pay. For each stratum we can deduct 15% of the gross pay from each faculty member and create an incentive pool for the stratum. Next we put in place a appraisal mechanism -- which could be a composite index of teaching, research and administrative tasks -- and create a relative ranking for each faculty within the stratum. At the end of the financial year, after appraisals are done, we can refund the money withheld from the middle 50 percentile -- who are the average. The bottom 25% lose their deduction and this money is used to reward and incentivise the top 25%. Obviously this should be done for each stratum of employees and every year -- so that everyone has a fair chance of getting a performance bonus. The quantum of deduction (15%) and the percentage of top raters (25%) can be tuned further to improve the effectiveness of this mechanism.

What this means is that without adding to the burden of the taxpayer, or tinkering with the overall parity structures created at the central government level, or even creating any long term distortion in an individual’s salary structure, we are allowing the local leadership to reward the top performers and sending a strong message on non-performance to the entire population.

Moreover, by decentralising the implementation of this scheme, each organisation can create its own appraisal model that would be in agreement with the nature of jobs that are being evaluated. Employees attached to each department should have a role to play in determining the parameters on which appraisal will be done and there must be a clear way to review each appraisal and ensure that the results by and large follow the normal distribution. Not everyone can be top rated.

Finally, experimenting with this approach is fairly safe because in case the scheme has to be abandoned after a couple of years then the organisation can simply pick up from where ever it was and carry on as usual without any disturbance to anybody’s careers.

Obviously, Government employees for whom performance appraisals is an alien concept  and organisations that thrive on mediocrity would find this concept difficult to accept, let alone implement  but even if one or two departments and organisations can get going with this idea it may bring in a whole new and beneficial change in the work ethics in the Government.

The only real challenge to this scheme would be to make to appropriate amendments to Government service rules so that orders to this effect are not overturned by tribunals and courts. However departmental and institutional leaders who can motivate their personnel to migrate to this appraisal model may find themselves to be regarded -- or appraised -- superior when it comes to their own career movements.

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