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Tuesday, 1 February 1994
Page: 82

Senator COATES —by leave—I table the transcript of evidence and submissions by the committee relating to the report just tabled.

  Ordered that the report be printed.

Senator COATES —I move:

  That the Senate take note of the report.

I presented this report to the President just before Christmas and it has now been formally tabled. The report is more critical of policy and administration than is common in committee reports. I regretted the need to be so critical but the criticism was fully justified on the basis of the evidence available to the committee.

  I very much regret that the government adopted the policy of performance pay. I should point out, however, that it was also strongly supported in this policy at the time by the opposition, which made it difficult for contrary views to gain currency. I hope that the government will now pay particular regard to this report and decide to abandon the scheme as the committee has recommended. If it does make such a decision, it will be greatly applauded, and I believe there will be immense relief throughout the Public Service.

  In short, the committee found that there were fundamental conceptual problems with the system of performance pay adopted in the Australian Public Service and the scheme was never likely to achieve the objectives set for it. The prospects for success were further reduced by serious design faults and by faulty implementation, especially on the part of the central coordinating agencies—the Department of Industrial Relations, the Department of Finance and the Public Service Commission. It should be remembered that serious warnings were given in advance of precisely the types of problems which occurred. Two reports of the finance and public administration committee in 1990 stand up very well in this regard.

  The committee's conclusions in the present inquiry are summarised in chapter 7 of the report. Briefly, they are that the performance pay system is based on assumptions about motivation and the nature of work in organisations that are not valid or appropriate for much of the Australian Public Service. The system required a degree of precision in the measurement of individual contributions to organisational output which is not realistically attainable in many public sector agencies in either the short term or the long term. In the absence of that precision, the motivational effects sought from performance pay could not be achieved and, as a result, none of its objectives could be met.

  As well as being unlikely to achieve its objectives, the performance pay system created a range of serious inequities and has been widely seen as divisive and destructive of team effort. Its link to staff appraisal detracted from the benefits potentially available from good appraisal systems in several ways.

  The implementation of performance pay was also flawed. Appraisal systems were developed and implemented very hastily in most agencies. Typically, the appraisal systems were established in a matter of a few months and then immediately used to support the payment of bonuses, which was in contradiction of all the relevant theory and of common sense.

  The central support for implementation was manifestly inadequate. Performance pay was said to be directed at a major change in Public Service culture. However, the central agencies coordinating its introduction were given no additional resources to manage its implementation. As a result, they accepted little responsibility for implementation, presenting as their excuse the usual slogans about devolution. The committee concluded that the central agencies had misrepresented the concept of devolved responsibility for management. Devolution is acceptable as a management strategy only if it is properly matched with accountability.

  The coordinating agencies developed a system which was then compulsorily applied to all departments and agencies. In doing so, they failed to design a system that could be expected to achieve its objectives; they failed to ensure that departments and agencies understood the system that had been designed; they failed to specify effective reporting and control systems and therefore failed to detect widespread departures from the letter and spirit of the system they had designed; and they underestimated the need for investment in implementation.

  The main result of poor system design and faulty implementation of performance pay has been a widespread lack of acceptance of the system. The extent to which the official submissions of departments and agencies were critical of the policy aspects of performance pay was unprecedented in my years of experience as a member of parliamentary committees. While there were some supporters, the response from individual public servants and from outside observers was overwhelmingly negative. The committee notes in the report that the willingness of so many to comment frankly on the problems posed by performance pay was in the best tradition and the best interests of the Public Service.

  The committee's general conclusion was that nothing could be retrieved from the present scheme. If the government wishes to persist in seeking the objectives it sought through performance pay, it could do so more effectively by beginning again than by attempting to repair the present scheme. There are other ways of achieving the types of objectives sought through performance pay. The committee has provided a partial list of alternatives. The current round of agency bargaining provides an opportunity to explore such options.

  I would like to express the committee's thanks to the staff of the Australian National Audit Office and to its own staff. This inquiry required the collection of a large base of factual information very quickly. The audit office, which had begun an audit of performance pay independently of the committee, worked with the committee in conducting a major survey of departments and agencies, collecting and analysing basic information on their implementation of performance pay. The full results of the survey are printed as an appendix to the committee's report, while the committee and the audit office drew on it for their separate reviews and reports.

  Use of the audit office in this way gave the committee access to expertise on survey design and additional analytical capacity as well as resolving possible problems related to individual privacy. This was a model of cooperation between a parliamentary committee and the audit office in which the independence of both was preserved.

  The committee was very keen to finalise this report as quickly as possible so as to have its views considered in the agency bargaining process. The inquiry was completed to an unusually tight deadline, imposing heavy pressure on all who were involved. In conclusion, I again urge that the performance pay system in the Australian Public Service be abandoned.