Pay and Performance in the Republic of Zambia 1

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1 Pay and Performance in the Republic of Zambia 1 Performance Standards and Enhanced Salaries Real wage reductions incite a vicious cycle of demotivation and under-performance, which may in turn be used to justify further reductions. The reverse is not necessarily true because, as commitment erodes, employees learn to diversify and supplement their income through private activities even during working hours. Even if enhanced compensation is paid this in itself may not be enough to encourage increasing performance among segments of the workforce. The issue raised here is two-fold. First, the pay increase must meet the workers minimum expectation of fair compensation before they are willing and able to commit fully to their work. Second, improved pay in itself is no guarantee that the workers choice of a level of work effort will match that desired by the Government (as an employer). Increased pay may be a necessary, though not sufficient, condition for increased commitment and performance. Mechanisms, therefore, must be developed to improve accountability, monitor performance, and institute reward and penalties. A new performance management system and employment policy is of significance here. A framework for institutionalising good performance requires, among other things: a. Assigning the right person to perform the right job task; b. Providing fair compensation for the work effort; and appropriate incentive payments (salary differentials related to skill acquisition and meeting and exceeding performance expectations); c. Setting clear and realistic work objectives and guidelines; d. Providing adequate and appropriate training and scope for skill acquisition (generally through learning-by-doing); e. Appropriate supervision, monitoring of work performance, and a fair, objective and transparent appraisal assessment process; and f. That the incentive regime makes a distinction between excellent, good and poor performers; and g. That rewards and penalties are both vital for a well-functioning regime: i. diligence and exceptional performance should be rewarded; ii. lax or poor performance should be penalised, with the minimum penalty in the case of SASE scheme being the transferring of incumbents in funded positions to positions 1 This information represents an excerpt of A Medium-Term Strategy for Enhancing Pay and Conditions of Service in the Zambian Public Service, The full document is available here.

2 iii. without salary supplementation; consistent poor performance or unacceptable work practices should lead to dismissal from the public service. Attempts should be made to limit activities that lower the worker's productivity and standard of performance and/or are detrimental to the delivery of services to the public. This can partly be accomplished by more effective supervision (and monitoring) and setting out and implementing appropriate work rules and procedures. Adequate supervisory personnel are complementary inputs to labour in the production process, particularly among low skilled workers. Supervision must be good and minimum standards imposed for an employee to keep his job. Good supervision, monitoring, and proper standards of performance are required before low skilled labour can be effectively utilised. Mechanisms, therefore, must be developed to improve accountability, monitor performance, and institute rewards and penalties. The Performance Appraisal System Regardless of the strategy adopted to improve performance or to link pay to performance and merit, an objective staff performance appraisal system must be introduced. The system should be based on setting objectives and targets for staff as basis for assessing: a. performance to determine whether or not staff merit the receipt of annual increments; b. performance and effecting promotion based on merit rather than on longevity of service; and c. exceptional/outstanding performance that could form the basis for merit-pay bonuses. The appraisal system should be perceived by workers as being both objective and fair. A transparent/open appraisal system is required. The system used by government of Botswana is exemplary. There, the officer fills in the appraisal form, providing initial information, including stating his/her views of the job s requirements, its targets, and what was achieved. After this brief selfappraisal, the officer submits the form to his/her supervisor. After appraising the officer, the supervisor returns the form to the officer for review. After reviewing the supervisor s comments on the form and, in some cases, personally meeting with the supervisor, the officer signs on the form, stating his/her agreements or disagreements. The form proceeds up the ministry s hierarchy, for a decision on whether to award the officer an annual increment. In this system, the worker receives feedback about his/her performance. If that is deemed low, he/she is warned unless extenuating circumstances hampered performance. If the evaluations are persistently bad, the worker faces termination. Operationalising such an appraisal system will also require that the goals and objectives of ministries/departments are clarified and delineated to facilitate the derivation of individual performance objectives and the development of satisfactory performance standards (quantified whenever possible) and measurement for the purpose of improving performance for the mutual benefit

3 of the officer and the government as an employer. In order to be able to match pay with individual performance and/or to take into consideration individual competencies, skills and team outputs, there is a clear need for the design and implementation of a clear and objective appraisal scheme. Employees should be involved in the appraisal and objective setting process so that: a. the assessment of performance is understood by the employee; b. the assessment of performance is accepted by the employee as an objective and fair basis for making decisions on annual increments, promotion and (if relevant) merit-pay awards; and c. the assessment of performance provides a common basis for identifying training and development needs. This will induce in supervisors a greater sense of responsibility towards their subordinates so that merit and salary awards and recommendations for promotions are based on actual work results and productivity, while disciplinary actions are based on concrete situations rather than generalities. Under the Performance Management Package (PMP), which is currently being piloted in nine MDAs that are more advanced in implementing reforms, the Zambia public service is in the process of developing and rolling-out the type of appraisal system described above. An environment has to evolve that will allow adequate transparency in the appraisal process. Judging from discussions with stakeholders, at present neither supervisors nor subordinates are comfortable with the prospect of open appraisals and providing total objective feedback. Given the meagre value of annual increment and the high inflation environment, it is highly unlikely that supervisors would put adequate time and effort into an objective and honest appraisal. It is unlikely that the effort will be viewed as worthwhile, with such meagre rewards. Proposed Introduction of Performance-Related Pay Upon the institution of an adequate and objective staff appraisal system it will be necessary to address the issue of under-funding of increments and promotions, while providing an incentive for improved performance. Further, it is important to keep in mind that positive incentives themselves are not enough to build an appropriate reward system. The civil service not only lacks positive incentives for improved performance, but also adequate sanctions for correcting continuing poor performance, mismanagement and neglect of duties. Both adequate incentives and adequate sanctions, which are seen as fairly dispensed, are part and parcel of a well-functioning reward system. This report recommends that on the basis of annual appraisal system assessment of personnel be categorised into four groups: poor performers, fair performers, good performers and excellent performers. This report recommends the following. Only increments and promotions that can fit in the budget and are based on an improved merit and performance appraisal system should be authorised. To ensure that annual increments are not awarded automatically, and that competition is induced into the system, annual increments should no longer be fully funded. An annual budget should be set aside to fund increments and promotions. The total pool of funds currently allocated for annual increments will be

4 divided into two components: a. Funds to pay for annual increments; and b. Funds to pay for merit/performance-pay bonuses. In some countries double increments are awarded for excellent/good work performance. In the view of this report such awards may be overly generous and may violate the principle of rewarding outstanding performance. The awarding of two increments may bestow a permanent benefit (annuity) for one year s excellent performance. Rather than add an additional increment over-and-beyond that awarded for good performance, the second award should take the form of a merit-pay bonus, equal to one year s increment. The benefit could be paid in a lump sum or quarterly. This would magnify its significance beyond that of a monthly increase in pay. In addition to the one increment, excellent and good performers should receive merit-pay bonuses. The amount of a full bonus should be equal to one year s increment. Excellent performers should be awarded a full bonus, while good performers should be awarded a half bonus. The benefit could be paid in a lump sum or quarterly. This would magnify its significance beyond that of a monthly increase in pay. However, it should be recognised that this proposal could not be instituted widely throughout the public service immediately. It should be piloted first in those MDAs that have already been restructured, where strategic plans are being operationalised, job descriptions have been re-written to reflect the detailed job content of the position in a restructured organisation, and performance agreements (where necessary) have already been developed. It would take time to effect the staff appraisal training and to introduce the performance management culture, the system can be truly deemed objective and fair. The Zambia public service is currently in the process of piloting the PMP in nine MDAs. Rewards, Penalties, and a Well-functioning Incentive Regime Positive incentives themselves are not enough to build an appropriate reward system. The Civil Service not only lacks positive incentives for improved performance, but also lacks adequate sanctions for correcting continuing poor performance, mismanagement and neglect of duties. In some cases, it also fails to enforce penalties as prescribed in the regulations to correct continued poor performance or deviant work behaviour. Both adequate incentives and adequate sanctions, which are seen as fairly dispensed, are part and parcel of a well-functioning reward system. A well-functioning incentive regime promotes improved performance not only by rewarding good performers, but also by imposing penalties on repeatedly poor performers and unacceptable behaviour. The present incentive regime fails to adequately reward good performance and behaviour. Nor does it always impose adequate penalties or punishments for persistently poor performance and or undesirable behaviour. Excellent, good and bad performers more often than not receive the same annual increments. There is need to make a greater distinction between the three groups by introducing strong positive inducements (and applying them fairly) and to enforce penalties to motivate performance.

5 The performance-management system must develop standards of performance for all categories of public servants. The standards for performance and behaviour are referred to as work norms. When rewards are given on the basis of objective and transparent criteria and penalties are rigorously applied for deviations from the norm, effort increases and performance improves. Performance managers who understand how to set norms can thus motivate employees to raise work performance. Recommendations With regard to relating pay to performance, it is recommended that: a. Mechanisms must be developed to improve accountability, monitor performance, and institute rewards and penalties. Good supervision, monitoring, and proper standards of performance as well as the implementation of appropriate work rules and procedures are necessary before employees can be effectively utilised and the delivery of public services can be improved significantly. b. On the basis of annual appraisal system assessment personnel should be categorised into four groups: poor performers, fair performers, good performers and excellent performers. c. In order to link pay to performance and merit, work measurement and an objective performance appraisal system should be introduced, based on setting objectives and targets for staff as a basis for assessing: i. performance to determine whether or not staff merit the receipt of annual increments; ii. performance and effecting promotion based on merit rather than on longevity of service; and iii. exceptional/outstanding performance that could form the basis for merit-pay bonuses. d. Only increments and promotions that can fit in the budget and are based on an improved merit and performance appraisal system should be authorised. To ensure that annual increments are not awarded automatically, and that competition is induced into the system, annual increments should no longer be fully funded. The total pool of funds currently allocated for annual increments will be divided into two components: i. funds to pay for annual increments; and ii. funds to pay for merit/performance-pay bonuses. e. Any additional increment awarded over-and-beyond that awarded for good performance should take the form of a merit-pay bonus equal to one years increment in order to avoid bestowing a permanent benefit (annuity) to an individual for one year s excellent performance. This should be paid in lump-sum or quarterly since this has the effect of magnifying its significance beyond that of a monthly increase in pay. The amount of a full bonus award should be equal to one year s increment for excellent performers and a half

6 bonus for good performers. f. Once objective performance criteria have been adequately designed and adopted, the GRZ should institute an approach where Permanent Secretaries and other Chief Executives in the Public Service are appointed on a competitive, merit basis on a three-year performance contract that is subject to renewal, based on performance. g. Where personnel with specialised skills or specific experts are engaged on a contract basis, the practice should be as follows: i. contract employment should be kept to a minimum, with personnel being only engaged on contract where capacity in the public service is lacking or specific skills are required; ii. the positions to be contracted should be consistent with the manpower requirements of the ministry or department as specified in its strategic plan; iii. personnel engaged on contract terms should be competitively recruited through an open and transparent process; and iv. contract personnel should be engaged by the GRZ, not by donors, even if the salary is paid through donor funding. h. The Government should work towards narrowing the gap between Public Service and Private Sector pay in order to be able to compete in attracting and retaining highly qualified professional, technical and managerial personnel i. Where practicable, public service positions should be filled through open recruitment to ensure that positions are filled on merit-bases.