John MacDonald: Performance pay's no bonus for the public sector

I feel really uncomfortable about the idea of public sector bosses getting performance pay.  

Not that the Government is going to care too much about that, because it’s confirmed that, from the middle of next year, that’s what’s going to be happening.  

It’s unclear to me at this stage whether it’s going to mean the heads of all our government departments are going to have some of their salaries earmarked in a category which is known in the HR game as “at-risk”. Which means some of your pay you’re not guaranteed to get unless you meet certain performance measures.  

The big-hitting chief executives in the private sector have these “at-risk” clauses. People like the head of ANZ, Antonia Watson, who fronted up to a parliamentary select committee yesterday and was asked how much she gets paid. And she told them it’s around $2 million a year.  

I’m more than happy for her and all her other private sector chief executive colleagues to be getting bonuses and extra pay for doing what’s required of them and doing it well, but I’m certainly not happy for the people in charge of social welfare, education, health —all of the essential public services— getting bonuses.  

And the reason for that is that public services can’t be pigeonholed like private operations can.  

If a private business is losing money on something, they can pull the pin. Easy. You can’t be so knee jerk when you’re running a public service.  

Because, generally, when a private business is losing money on something it’s because there’s less or no demand for what they provide. So you stop doing it.  

If you’re running the social welfare department, though, or health, you lose money hand over fist, but you can’t do much about it because —despite the fact you're chewing through the money— demand is always going to be through the roof.  

It’s the complete opposite of what happens in the private sector.  

The Government’s bringing back performance pay for public sector bosses after the former government got rid of it back in 2018.  

Chris Hipkins was the State Services Minister back then, and he got rid of the performance pay and bonuses because he wanted to put a bit of a handbrake on the pay pockets for the heads of government departments, which seemed to just be going up and up and up at the time.  

And I remember before then, you had politicians saying that performance pay was needed to make sure the public sector could attract the best people to run all the government departments.  

What they meant, of course, was that they needed to compete with the private sector and so they had to offer the same kinds of sweeteners.  

But I think we can agree that that hasn't necessarily been the best thing, and that someone who is a brilliant private sector chief executive doesn't necessarily make a brilliant public sector chief executive. And vice versa.  

Where I see problems with performance pay in the public sector is it will create tension and division. In fact, it will be worse than that. It will mean we see less genuine leadership in our government departments and more government puppets running the show.  

I’m not saying that a government department or agency should be run independently from the wants and expectations of the government of the day, it would be naïve to even suggest that.  

But if you’ve got the head of a government department being told that they’ll get a bonus if they do this or do that, or achieve this or achieve that, then their sole focus is going to be on pleasing the Minister.  

They’re not going to advocate on behalf of the people who work for them, they're not going to rock the boat. They’re not going to be the type of leader that I think we need in the public sector.  

They’ll be even more “yes people” types than they are at the moment because they’ll know that, if they aren’t, the bonus won’t be coming. 

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Episode Transcript

Speaker 1 (00:06):
You're listening to the Canterbury Morning's Podcast with John McDonald
from News Talk ZB.

Speaker 2 (00:13):
I feel really uncomfortable. I feel really uncomfortable about the
idea of public sector bosses getting performance pay. In fact,
I don't feel I don't just feel uncomfortable. I'm dead
against it. Not that the government's going to care too
much about that, because it has confirmed that from the
middle of next year that's what's going to be happening.

(00:35):
And as I say, I'm not happy about it. It's
unclear to me at the stage whether it's going to
be in the heads of all our government departments are
going to have some of their salaries air marked in
a category which is known in the hr game as
at risk, which means some be pay you're not guaranteed
to get unless you meet certain performance measures. The big

(00:57):
heading chief executives in the private sector, for example, they
have these at risk clauses, people like the head of
a and z Antonia Watson. I have seen her on
the news. She fronted up to a Parliamentary select committee
yesterday and she was asked how much she gets paid.
She told them it's around two million bucks a year

(01:18):
and some of that of course will be performance based
and dependent on how big a profit the bank makes,
not that she considers the profits huge. As she told
the MPs yesterday, I'll tell you what, I'm more than
happy she can filler boots. I'm more than happy for
her and all of her other private sector chief executives
to be getting bonuses left right and center and be
getting extra pay for doing what's required and required of

(01:42):
them and doing it well. But I'm certainly not happy
for the people in charge of social welfare, the people
in charge of education, the people in charge of health.
I'm not happy for these people who run essential public services.
I'm not in favor of them getting bonuses. And the

(02:02):
reason for that is that public services can't be pigeonholed
like private operations. Can you know, if a private business
is losing money on something, they can pull the pin,
easy over gone. You can't be soneedj though, when you're
running a public service, because generally when a private business
is losing money on something, it's because there is less

(02:24):
or no demand for what they provide, so you stop
doing it. You perform well, yeah, get a bonus, go
for it. No tears. If you're running social welfare, though,
or health or education. You lose money hand over fist,
but you can't do much about it because despite the

(02:45):
fact you're cheering through the money, demand is always going
to go through the roof in the public sector. That's
just how it is. It is a complete opposite of
what happens in the private sector. So the reason the
government's bringing back performance pay for public sector bosses is
that the former government got rid of it twenty eighteen.

(03:07):
So Chris Hopkins was the State Services Minister back then,
and he ditched performance pay and bonuses because he wanted
to put a bit of a handbrake of sorts on
the pay packets for the heads of government departments, which
seemed to be just going up and up and up
and up at the time. And I remember before then
you had politicians saying that performance pay was needed to
make sure that the public sector could attract the best

(03:29):
people to run all the government departments, which what they meant,
of course, was that they needed to compete with the
private sector, and so they had to offer these kinds
of sweetness. But I think we can agree, can't we
that that hasn't necessarily been the best thing, and that
someone who was a brilliant private sector chief executive doesn't
necessarily make a brilliant public sector chief executive, and also

(03:51):
vice versa. And where I see problems with performance pay
in the public sector is that it will create tension
and division. In fact, it'll be worse than that. It
will mean that we see less genuine leadership in our
government de partyartments and more government puppets running the show.

(04:12):
For example, remember David Mates when he ran the health board.
People loved him because he stood up and he advocated
for the people who worked for him. Now, I'm not
saying that a government department or an agency should be
run independently from the wants and expectations of the government
of the day. I mean it would be naive to

(04:32):
even suggest that. But if you've got the head of
a government department being told that they will get a
bonus if they do this or do that, or achieve
this or achieve that, then their sole focus is going
to be on pleasing the minister, isn't it. They're not
going to advocate on behalf of the people who work
for them, the people who deliver these essential public services

(04:52):
to you and me. They're not going to rock the
boat and they're certainly not going to be the type
of leader that I think we need in the public sector.
They will be even more of the yes people that
they are at the moment, because they'll know that if
they aren't, the bonus won't be coming.

Speaker 1 (05:12):
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