Incentivising good performance - Nowook Park, Korea

Incentivising good performance - Nowook Park, Korea

• 1.
  Performance-based Incentives in theKorean Government Nowook Park Center for Performance Evaluation & Management Korea Institute of Public Finance
• 2.
  Key issues inproductivity improvement through budgetary incentives The individual and organizational incentives should be congruent in the performance budgeting process. Performance budgeting system provides few positive incentives to performing individuals and organizations. • Reallocation of funds from ineffective programs to effective programs • If efficiency criteria is used for budgeting purposes , there is danger of reduction of budget and staffs for efficient programs.  Program managers are penalized for improving productivity of their programs.
• 3.
  Incentives for efficiencysavings Give more autonomy for budget formulation and execution Allowing efficiency savings funds, which allows a part of savings can be reserved within the organization • Can be used for personal or group reward • Can be used for the other purposes with the approval from the central budget office or the parliament • Reallocated for other programs within the organization Reallocate programs to efficient organization Personal rewards or recognition to the top managers may not be enough Reward to the organizations who provide quality information to the performance budget process 3
• 4.
  Performance based incentivesin Government Units of Incentives • Organization • Team • Individual Types of Incentives • Promotion • Financial rewards • Recognition Types of Performance • Budget savings • Assessment by superiors and peers • Assessment by expert committee 4
• 5.
  Performance Pay inthe Korean Government Units of incentives • For higher ranked officials: individual performance salary • For middle managers and below: performance bonus for an individual or a team Types of performance • For higher ranked officials • Based on performance agreements, including specific performance targets • For middle managers and below • Varies across ministries, including team performance assessment and self-assessment of operational performance 5
• 6.
  (e.g.) Significance ofperformance bonus Grade S A B C Ratio among evaluated civil servants 20% 40% 30% 10% Bonus Amount (% of monthly salary) 172.5% 125% 85% 0% 6
• 7.
  Incentives for goodorganizational performance Incentives by the prime minister’s office • Incentives for good self-assessment practices • Incentives for good program performance  Lump sum monetary rewards for organization Incentives by the Ministry of Strategy & Finance • Incentives for good self-assessment practices  Lump sum monetary rewards for organization  Reduction of the fiscal consolidation target for the next assessment 7
• 8.
  Incentives for BudgetSavings “Budget Performance Bonus” Unit of incentives • Team or individual Types of incentives • Monetary rewards • Max $30,000 for an individual • The amount of one year-salary for the reduction of positions • 50% of operational cost savings • 10% of program cost savings 8
• 9.
  Procedure Application 1st review bythe committee in the line ministry 2nd review by related ministries and experts Final decision by the review committee for the budget performance bonus 9
• 10.
  Performance of “BudgetPerformance Bonus” Paid Budget Performance Bonus • 1,922 cases, $35 million between 1998-2013 Amount of budget savings • Expenditure savings: $2 billion • Revenue increase: $13.5 billion Shift focus from revenue increase to expenditure savings 10
• 11.
  Lessons Monetary rewards help,but it should/can be complementary not primary incentives. Performance budgeting may be in conflict with individual and organizational incentives in the public sector for the purpose of efficiency improvement. Monetary rewards helps to align individual and organizational incentives, partially. Proper combination of non-monetary rewards and monetary rewards are required. 11
• 12.
  Thank you!