No performance pay for Govt CEs

Stuff reports:

The Government is stripping public service bosses of their performance bonuses, a move it expects will help save the country $4 million.

State Services Minister Chris Hipkins announced the end to performance pay on Tuesday, a day after Prime Minister Jacinda Ardern announced a year-long freeze on MPs’ salaries.

Until now public service chief executive remuneration packages have included the potential to receive a discretionary payment of up to 15 per cent for “exceptional performance”. …

Hipkins said research showed individualised performance pay was not an effective incentive for higher performance for complex roles.

Hipkins is sort of right. At CE level getting $550,00 vs $500,000 is not the motivator. It is being seen to perform well. If done well, performance pay can be a useful tool for employers. It allows you to clearly signal what you want the CE focused on, by tieing their at risk to it. But you can do that also without performance pay.

Performance pay tends to work best in organisations where profit is the main driver. If you make the company more profitable, you get paid more. In non-profits it is more challenging.