Should Performance Pay Affect Public Administration: The Case of the United Kingdom (UK)

“…Despite the widespread use of Performance Related Pay-PRP schemes, questions remain about their effectiveness” (CIPD 2021).

What is Performance and Performance Management:

Performance is business success. The term performance management became especially popular in the late 1980s and early 1990s (Williams, 2002). Performance management is an important business process that combines well-coordinated individual and team efforts with corporate goals (Forbes, 2021). PRP tends to increase efficiency and effectiveness. It is taken into account all over the world (Ateş and Dönmez 2013).

What is Performance Based Pay:

Performance-based pay is a way of managing pay by linking pay progress (usually against pre-agreed targets) to an individual performance appraisal (CIPD 2021).

In Which Sectors Performance Based Payment Is Used:

Performance-based pay has long been used as an incentive in the private sector. It is common in the private sector (CIPD 2021). However, it is also frequently applied in the public sector in the Anglo-Saxon world, especially in the USA and the UK, and in developed countries. In the 1990s, performance took priority, especially in OECD countries (Blum & Manning, 2009).

Why Performance Based Pay is Needed:

Using wages as a motivation tool to increase job performance is an old practice in the private sector. The problem of waste, inefficiency and efficiency in public administration has been the source of the idea of ​​performance-based payment. An economical, effective and efficient system is designed based on reason.

PRP is mostly used as part of performance management and its habitat is associated with the following actions:

* Purpose and target clarification,

* Harmonization of individual goals and objectives with organizational goals and objectives,

* Measuring success.

The theoretical basis of PRP and the main force in using the system are based on increasing individual and team motivation. The basic principle of this idea is that a motivated worker/team does its best. Thus, it contributes to organizational development. There is also an increase in the wages of the employee.

Should Performance Be Evaluated and Employee Performance Measured?

If you can't measure, you can't manage. You can't be fair if you can't evaluate. If you equate the employee with the one who does not work, you will reduce the productivity of the employee.

For this reason, performance evaluations are seen as the basis of performance management systems in the world. The 360-degree performance evaluation system, which combines organized goals with individual goals, is at the top. These performance evaluations generally measure the performance of public organizations as well as measuring individual performance, training, incentives and rewards. There are different methods to measure employee performance. However, there is a general tendency towards systems based on measuring goals, rivalries and personal competencies (Horton, 2009).

Performance Evaluation-Wage Relationship and Application:

Since the strategic development of human resource management in the 1980s, there has been a clear trend to link performance appraisal with employer awards. Many EU countries have begun to link employee evaluation with awards. In the UK, the private sector (60%) wants its performance to be reflected in the award more than the public sector (36%) (CIPD, 2010, 2021).

How Performance Based Wage-Payment Systems Work:

Although less strong than France (CIPD, 2021), the strong representative of continental Europe (CIPD, 2021), the currently widely used PRP in the UK is a pre-planned reward system called bonus, performance payouts, an increase in base monthly payments or bonuses. It could be a payment system. Accordingly, cash bonuses are awarded as a result of annual performance evaluations, provided that they are earned every year.

What are the Reasons for the Performance-Based Wage Payment System:

PRP objectives can be grouped under three main headings (CIPD, 2021).

1- Encouraging high performance levels by linking performance to pay

2- Establishing an entrepreneurial or high-performing culture throughout the organization

3- Establishment of the concept of equality or justice

While the first goal is the individual, the second is the organizational positive side of motivation, the third goal is the ethical side.

Why Governments Establish Performance Based Remuneration System:

Governments prefer PRP systems for the following reasons, as long as they do not assume an authoritarian character and shift to a system of loyalty based only on them:

* The main reason for governments to establish these systems is to encourage them to work with awards and increase performance.

* The second is to attract more qualified personnel and compete with the private sector.

* The third is to use PRP as a cultural change tool by letting the team know the organization's expectations and goals. Accordingly, PRP aims to make the public sector more transparent and connect with performance. can be used to show the sound.

Problematic Aspects of Performance-Based Remuneration Systems:

If a system has strengths, it must also have weaknesses. As a matter of fact, despite the ideas put forward about the positive effect that PRP will have on employees by motivating, studies show that its application may not always result in performance increase and development. Moreover, some studies also reveal the negative effects of PRP on workplace relationships:

Perfect theory and poor practice are the biggest problems of KPY and PRP.

On the other hand, unexpectedly, academic criticism of the performance appraisal system has softened recently, and although the criticisms have turned to business administration or turned into public domain defense or have been criticized by the incompetent, interestingly, it has focused on how to measure performance (Talbot, 2007).

In parallel, it is always considered that measurement problems may occur due to insufficient data and complexity of effects (Sir Bourn, 2007).

Another criticism is that it has many conflicting goals (Strebler, Bevan, & Robinson, 2001).

On the other hand, as Holloway, Lewis, and Mallory (1995) stated, internal and external sectoral differences in performance priorities are often shaped by the interests and power balances of power-holding intermediaries.

Another concern in this regard is prejudice, lack of objectivity, coherence and equality that may arise from gender, ethnicity, political ideas and religious beliefs.

Moreover, performance appraisals can be seen as a time consuming thing and a formality that reduces the effectiveness and efficiency of the appraisal.

Problems of Performance-Based Remuneration Systems in the UK:

On the other hand, in addition to the general problems above, the UK application also presents specific problems and separate data on these areas:

1. First of all, according to research among civil servants working in four different ministries, the PRP approach is not welcomed by the majority of civil servants. Reasons for this:

a. Being unrelated to the organization's core concerns

b. Creating discussion within the team,

c. It causes complaints such as unfair results due to the low organizational contribution of those with high individual performance.

2. In the UK application, PRP is again used by many employees;

a. Shrinking the team spirit,

b. divider,

c.  fueling jealousy,

D. It is perceived as a demoralizing concept.

The reasons for this negative effect that injure the employee are various:

It is difficult to measure employee performance in the public sector.

Second, employee motivation and effort may not always yield positive results.

The third is the perceptions on the fairness of the system, which may arise from differences that may occur especially in rewarding and performance evaluation. Efforts for fair and unclear rewards can cause serious problems, especially when associated with wages, and raise a general doubt about the fair operation of this system.

Employees think that evaluations are not objective, that employers always reward their favorite people, no matter how hard they work. Frustration fed by these perceptions makes employees reluctant and lowers their motivation.

Fourth, the amount of reward also disappoints employees. Because the reward is usually set too small to have a certain effect on the employee. Whereas, employees want a reward that is good enough to motivate them to work better. A government study in the UK shows that the award should be at least five percent (5%) of the salary (Makinson, 2000).

3. There is also consensus on the non-financial rewards (Horton, 2009).

4. As a matter of fact, another study (Prentice, Burgess and Propper, 2007) showed that the results of PRP in the UK were not evaluated and there were many results that were not all positive. According to this;

a. First of all, these schemes are responded to in public administration, especially in the field of education (CIPD, 2021) and health,

b. Some evidence shows that there is no increase in productivity by manipulating the behavior of resource users.

It is seen that there is evidence that the effect of PRP on the increase in social welfare is very small.

5. On the other hand, it is understood that public sector leaders are motivated by mission rather than money (Besley & Machin, 2008).

6. It is known that a non-optimal reward can weaken the desired effect and even create the opposite effect (Chen & Jiang, 2005).

7. Survey on pay attitudes of employees shows that private sector workers are more likely than their public sector counterparts to want their rewards to reflect performance

CONCLUSION or Evaluation of UK PRP Application:

Despite the great interest in PRP in the public sector for many years, it has been difficult to translate into practice. Where performance pay occurs, it often takes the form of unconsolidated bonuses and/or team-based incentives; this approach is recommended in the Makinson Report (2000) on performance pay in central government rather than individual merit pay (CIPD, 2021).

First of all, when we look at the critical results; Difficulty in measuring performance, perceived fairness, quota usage, bonus amount and real motivators are seen as the reasons for the weak effect of PRP on staff motivation. In addition, PRP can be seen as a system that causes jealousy among personnel, prevents teamwork and creates separation.

Despite all these shortcomings of the system, it is generally cost-effective and has some positive effects on employees who receive performance payments. As a matter of fact, another study conducted in the UK (Burgess, Propper, Ratto, & Tominey, 2004) shows that the incentive wage application is more cost-effective than the general monthly application and explains the continuation of efforts in this area. It has been found to increase production (Marsden et al., 2001). In addition, the use of the PRP system causes it to set clear corporate goals and increase the contribution of the employees to the institution.

Another positive effect of PRP is that it provides transparency in terms of personnel and the personnel take responsibility in order to show themselves better and deserve the performance bonus. Transforming public institutions into a more flexible structure and facilitating institutional change is both the reason for preference and the indicator of other positive effects of the system.

Another study shows that traditional motivators used in public, such as the idea of ​​helping people, human relations, managing people, educating students, protecting the public, saving lives, still have a great impact on employees. It has been revealed that such spiritual motivators rather than money provide a more positive motivation on people. While Herzberg (1987) counts motivators for employees, he counts success, recognition for success, work itself, responsibility and growth or development, and does not speak of money as a motivator itself. One aspect that will balance the problems with PRP is the fact that when it provides transparency and accountability in the public sector, it increases motivation, especially among rewarded personnel.

As a result, the idea of ​​earning more often leads the employee to work overtime, and this motivation brings high performance. This leads to an improved organized performance. But not ignoring the moral motivations for success and being fair and transparent creates the balance of the PRP system. In summary, research shows that UK PRP applications; Despite some hesitations, it is used without decreasing because it provides cost effectiveness.