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Monday, 30 May 1994
Page: 889

Senator WATSON (7.13 p.m.) —Following the report of the Standing Committee on Finance and Public Administration, tabled in early December of last year, the government's response has been received with commendable promptness. However, that is where the praise ends. The committee's report made five specific recommendations on performance pay, one of which was that the performance pay system should be abandoned no later than the expiry of the Australian Public Service workplace bargaining agreement in December 1994.

  The government's response attempts to argue that performance pay can serve to provide a link between rewards and achievements of corporate goals. It does so in an environment where the concept has failed elsewhere around the world. The government then further argues, rather ineptly, that this can be achieved through a system of formal appraisal and the overall exercise can move towards the better realisation of those goals and the activity required to reach them.

  The committee is quite adamant about the need for appraisal but not performance pay linked to those appraisal concepts. The government's approach assumes two things that are a little unrealistic: firstly, that appraisal can properly measure performance with acceptable accuracy—and we found there were problems not only within agencies but across different agencies—and, secondly, that those being appraised will accept that this can be done. I thought it was just another excuse for a backdoor method of getting wage increases into certain top echelons of the public sector. Unfortunately, the government's response fails to relate any experience known to refer to this type of appraisal in other areas. As the practice has been made use of in many other places for many years, it would seem sensible to make use of those experiences to reduce our need to reinvent the wheel.

  I compliment Senator Coates on his courage in chairing the committee that brought down recommendations that are running contrary to the thrust of what the government is doing within the bureaucracy. I trust that the government's failure in this document to reflect on the experience of others cannot be seen as a lack of confidence in the most up-to-date information available. Could it be that this sort of reference might well show that the fad for this type of scheme appears to have expired at about the time the Australian Public Service decided to adopt it?

  I also note that an edition of the Economist of a few weeks ago, to which my colleague also referred, reported the emerging consensus in well-managed organisations that have tried performance pay schemes and that there exists an aversion to schemes like the one adopted by the Australian Public Service. While those schemes might look initially attractive, over time that attraction disappears very quickly as people become somewhat disenchanted.

  None of the coordinating agencies were able to supply the committee with references to any empirical evidence which points to any benefits being achieved from such systems in any public sector. The simplistic approach to initial problems with introducing the system also leaves much to be desired. The government states that initial problems `are symptomatic of the cultural shift inherent in introducing the arrangements, the fast pace of change and the lack of familiarity and experience with such schemes on the part of managers and staff'.

  The remedy is seen as the issue of yet another circular clarifying the earlier circulars. We must all doubt whether a major cultural change in the workplace can be successfully achieved by the official issue of circulars! The government's response also expresses strong scepticism about the possibility of any extension of performance pay to officers below the senior officer grades. This is based on the belief that performance appraisal can only operate when linked with rewards. This argument moves in ever decreasing circles as appraisal needs rewards to work but the rewards depend on appraisal.

  Appraisal is said to be of great importance for the top 10 per cent of the Public Service, 80 per cent of whom are in Canberra and few of whom deliver measurable services, but of little importance for the rest of the service. I hope that the future of this system is not linked to the professional reputation of its initiators. It would be unfortunate if senior people in the Public Service could not objectively and fairly appraise the problems facing the system.

  Any personal or professional investment which may lead to a need to justify a continuation of the system in spite of difficulties should not be tolerated. The extension of formal performance appraisal more widely across the Public Service certainly appears to have the potential for positive results. The continuation of the performance pay system, unfortunately, does not portend any such rewards. I commend the report to the Senate.

  Question resolved in the affirmative.