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Pay-for-Performance in the Social Sector

by Gail Finger
Senior Consultant

Providing services efficiently and effectively is becoming more and more of a challenge every day in the social sector. Budget cuts, increased costs, and the loss of a critical knowledge base with the baby boomers beginning to retire are all taking a toll.

More than ever, social sector organizations need their employees to be more innovative and creative in order to improve efficiencies while at the same time staying mission focused. One hurdle that stands in the way of innovation, however, is long-standing performance management systems.

Traditionally, social sector organizations rewarded longevity and loyalty rather than innovation through processes such as automatic step increases. But as the nature of the work being done in the social sector has grown much more complex, it has called into question whether this kind of reward and promotion system best serves the organizations, their employees or the public.

In order to address the challenges, some organizations are looking to encourage a culture of achievement by implementing pay-for-performance systems. Several Federal agencies have already made the shift and Congress is considering replacing the General Schedule with pay-for-performance in all Federal agencies by 2010.

The shift will not be an easy one for social sector organizations. While the new systems are likely to improve efficiencies, the gains will not be realized if people in the organizations do not fully buy into the reasons for the change. Organizations need to recognize this reality and be prepared for the people side of change.

The change to pay-for-performance will be one of the most difficult challenges social sector managers will ever have to face. It will completely change the relationship they have with their employees and will require a whole new set of supervisory behaviors. Managers will be required to provide constructive, and sometimes negative, feedback. They will be required to set realistic goals and outcomes for each employee, and provide continuous feedback throughout the year so there are no surprises during the yearly evaluation. Perhaps the most difficult transition for managers is that they will, for the first time, be responsible for deciding the salary their employees will receive.

So, how can social sector agencies prepare themselves and their employees for such a dramatic change in how work gets evaluated and rewarded? Edizen believes that there are three critical first steps:

It will be important to include front-line managers in the discussions early on. It is crucial to have their buy-in if the new system is going to work. They are the ones who will be communicating with employees on a personal level about the changes. If they don’t understand why it’s necessary and what the goals are, they won’t be able to get their employees on board.

Help everyone understand how the change will affect them personally. Managers who have never had to communicate this kind of information in the past will need training and coaching on how to lead their people through change.

Provide information in a timely manner. Be sure everyone has access to information by using many different venues to communicate including face-to-face meetings, web sites, newsletters, memos, emails, Q&A forums, and other means.

The bottom line is that if front-line managers aren’t ready for the change, the organization isn’t ready. Best practice approaches include a combination of training and coaching for front-line managers to help them acquire the behaviors necessary to implement new processes and to help others accept and buy into the change. When a training and coaching program is provided the following positive results can be achieved:

New pay-for-performance systems can be integrated into the culture more quickly

Problems of perceived unfairness or favoritism can be avoided

Managers who are confident implementing the new system can help to boost morale and gain buy-in from staff

Agencies will be better able to attract and retain the talent they need to improve efficiencies while meeting the core mission of the organization

Gail Finger is an Edizen Senior Consultant who brings in-depth training in psychology and over 20 years of experience in the areas of human motivation, performance and the psychology of change.

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