Forget Performance Related Pay in the MOD, all Performance Related Pay Is Flawed Anyway

The was a lot of fuss yesterday about Performance Related Pay (PRP) in the Ministry of Defence yesterday, but little discussion of the reason it was introduced and the very fact that virtually all PRP is flawed.

Looking in to the details of the MOD PRP system, it appears that staff were effectively robbed of the pay increase they might have expected in the past with the promise of a performance based system that was designed not improve performance but instead, like all PRP system, was designed to save money.

When I worked at worked at Norwich Union in a team of 10 people, we were sold the idea of PRP being introduced that would "reward people for their efforts". When you looked at the system itself, it was nothing of the sort.

Of the ten people in a team, only a maximum of two could receive the top rating of "1", a further two could receive a "2" and three people could receive a "3", meaning that three people had to fight it out to get the remaining two "4 ratings, leaving one more person to get "5". Put simply, you were not and could not be rated on your performance because you were forced in to bands. if everyone in the team did the same work and every worked to the best of the abilities, one of those outstanding people would still have received the lowest rating of "5" whilst his or her colleagues, doing exactly the same work to the same standard could receive the top rating of "1".

In short, PRP is not a means of rewarding people for the work they have done. It is a means of paying people different salaries for doing the same job.

I know of a Council, for example, that allows its HR department to choose which council department should receive the highest "one off" performance bonus each year and, surprise surprise, the HR department wins the award almost every year.

So let's not criticise staff in the MOD for getting PRP. Let's castigate those morons who thought PRP should be introduced in the first place.


Tom Paine said...

I agree that the performance-related pay scheme you mention was badly-conceived because of the banding. Excellent performance by all was vanishingly unlikely, but it was also very unlikely that the range of performances would fit into the arbitrary model.

I imagine Norwich Union based it on some kind of profile of past performance. Even if that was a guide to future conduct, it's illogical because such a scheme is designed to modify future conduct!

It sounds like some manager somewhere (probably in the finance department) decided to make sure the scheme could never go over budget, thereby negating its value.

It seems rather a logical leap to reason that all performance-related pay schemes are therefore wrong and even more so to imply that everyone who ever implemented one is a "moron".

After all, the alternative to performance-related pay is pay unrelated to performance, which is both unjust and likely to lead to perverse effects.

Norfolk Blogger said...

But PRP systems are very very often like this.

I gather the MOD scheme was/is also a banding system, and this is the most common form of PRP around.

The alternative systems are like those that banks operated which rewarded taking great risks with other peoples money.