1 A model for introducing Performance Related Rewards in Government of India Prof Biju Varkkey, IIM Ahmedabad.

2 Introduction Introduction of PRR in government would lead to significant improvements in economy, efficiency and effectiveness. It will enhance employee motivation and will provide performing employees with opportunity to earn. The experience of performance related pay in government in a number of countries has shown that it led to productivity improvements and efficiency gains as well as tangible cost savings. (OECD Studies). Yes there are negative examples also. These savings may be marginal in the beginning, in the medium and long run these could be substantial and the PRR scheme can become self- financing.

3 Introduction Pilot studies in India support the well known fact that, the approach to PRR should be contextual – since expectations and measures of performance are such. “Reforms” become integral to introduction of PRR

4 Introduction Definition of PRR in GoI emphasizes that: PRI is not an assured entitlement for all employees. It is totally based on performance (individual, group or combination) and varies according to performance. PRI payment will be made over and above the compensation entitlement for a particular rank/position The model will be 1+X, where X is expressed as percent of the annual basic salary. The value of “X” should be decided by the ministry/department. The PRI system runs with the support of Performance Budgeting at Macro Level, Employee Performance Management System (PMS) system and MIS system. Clarity about objectives and deliverables at multiple levels, starting with ministry and cascading down the line up to individual level has to be worked out. PInitiating the process of internal reforms.

5 Introduction Definition of PRI in GoI emphasizes that: PRR is for the measures of employees’ performance that are within the ambit of their influence. PRR is only awarded when targeted performance levels are exceeded by the individual or group. The PMS and MIS systems will capture the extend of target achievement. However, in rare cases when target achievement has failed to materialize because of unpredictable events, limited moderation can be applied. The fund for pay out should be generated from benefits accruing through higher productivity, cost efficiency etc. Awarded after a proper assessment of completed tasks. It is not meant for anticipated results.

6 Conceptual PRI Model for the Government of India Two-stage model is proposed that can be generalized across the government Basic Reforms  Restructuring work processes (HWPO)  Greater delegation & autonomy  Enabling environment  PM S& MIS Basic Reforms  Restructuring work processes (HWPO)  Greater delegation & autonomy  Enabling environment  PM S& MIS PRI (Phase-I) PRI (Phase-II) Outcomes Efficient, Effective & Responsive Governance Outcomes Efficient, Effective & Responsive Governance Sources of Funds  Cost efficiency  Higher productivity Sources of Funds  Cost efficiency  Higher productivity Focus on outcomes, service delivery Outcomes/service delivery Advanced Reforms  Restructuring work processes (HWPO)  Greater delegation & autonomy  Process reengineering  Accountability mechanisms Advanced Reforms  Restructuring work processes (HWPO)  Greater delegation & autonomy  Process reengineering  Accountability mechanisms Sources of Funds Cost efficiency Higher productivity Sources of Funds Cost efficiency Higher productivity

7 Reforms and restructuring involves: Process Re-engineering and restructuring Performance Management High Performance Work Organization (skill enhancement / training / multi- skilling, cross-training and job rotation, career development paths and job enrichment etc.) More delegation with autonomy and accountability. Public Service (Stake Holder) Accountability – Sevottam. Conceptual PRI Model for the Government of India

8 In the long run PRI can lead to the following positive results : Enhance employee productivity/performance and motivation: PRR will be linked to achievement of targets and not length of service. This will motivate employees to work towards their targets, thus enhancing their productivity. This can be one of the earliest achievements. Better internal business processes: One of the key effects of implementing PRI will be that inefficient or redundant business processes will be reviewed to improve organisational or group or individual performance. Improve citizen service delivery: Customer orientation of employees will be further honed if certain targets/ measures are directed towards it. Develop result/business orientation: Result orientation focuses on efficient and effective governance and business orientation focuses on promoting market value of products/services. Expected Outcomes

9 In the long run PRR can lead to the following positive results : Strengthen team spirit: Group rewards help in fostering teamwork. They also assist in clarifying organizational/ group objectives and engage employees with the organization’s goal. Perception of procedural justice: PRR has two-way link with perceived procedural justice. On one hand, proper goal setting and objective and transparent assessment of performance will lead to perception of procedural justice. On the other hand, perceived procedural justice is very critical for long term success of PRR Attract talent: Accountability: Expected Outcomes

10 “The end objective of PRR in government about benefits is not just limited to obtaining higher productivity or output, but seeks larger goals of economy (cost-effectiveness) efficiency, effectiveness and responsive governance.” Expected Outcomes

Thank You 11