Organisations I deal with often ask how much influence corporate performance should have on payments from their PRP (performance related pay) schemes. This is mostly a problem for public sector and not-for-profit organisations. Private sector companies can easily separate corporate and personal performance by setting aside a proportion of profit for a staff bonus shared evenly across the workforce as, say, a flat percentage of salary.
This leaves them free to use the PRP scheme to reward individual performance on the basis of an annual appraisal that assesses factors specific to each individual and role. Traditionally, the rating would be reflected in the next pay rise and/or progress through a pay range. More recently, especially in the Civil Service, appraisal ratings often link to non-consolidated, non-pensionable payments; or bonuses.
But what do you do if, like the Borders Agency, organisation-wide performance falls away? The Agency was criticised last month for paying bonuses to their top 29 senior managers in spite of ‘losing’ a large number of asylum applicants. Is this fair? Certainly, not all of the 29 will have had personal targets that included “do not lose asylum seekers”.
One option is to match the effect of organisation success to the level in the hierarchy. Perhaps the Chief Executive’s payment might be based on performance of the organisation overall while that of the senior management team one-third on that of their own department and two-thirds on collective performance – the collective element then diminishing as you go down the organisation ladder. After all, it is not the receptionist’s fault if the marketing strategy goes wrong.
In the present climate, the very word ‘bonus’ generates headlines and is an easy target for those keen to cast stones. I think the term is fairly recent coinage within the Civil Service and was, perhaps, thought to give a more business-like feel. Time to hide behind new terminology, perhaps. How about; ‘contingent pay’ or ‘re-earnable pay’?
