Approximately one year ago the Secretary of the Victorian Department of Premier and Cabinet announced the Premier’s decision to remove performance related incentive payments from the VPS Executive Officer employment and remuneration policies. The rationale cited for this decision was that VPS EO bonuses were generally not effective in driving performance and that the global provision of bonuses to public service executives was unique to Victoria amongst the Australian jurisdictions.
If we assume that the performance of these executives did leave room for at least some improvement, and money interests them, why did the incentive scheme fail, and what can be learned from the failure of this incentive scheme? I believe that the explanation has something to do with the relationship between individual performance and the incentive payments received.
Did each executive’s manager know how that executive was performing, and were the associated payments calibrated to that performance? The answer is almost universally a resounding no – judging by the uniformity of performance ratings and associated incentive payments.
Which brings me to the performance management process. The removal of this incentive scheme presents an opportunity to invest in improving the executive performance management process. When it was tied to a monetary outcome it was driven by the weight of the dollar toward a uniform outcome across each executive cohort. The incentive payment became a form of deferred salary with little or no relationship to performance per se.
The opportunity now is to drive toward a more finely calibrated view of individual performance and a more honest conversation about the relative rating of that performance. Let’s hope the next VPS Commissioner picks up the improvement of executive performance management as a worthy objective.