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July 19, 2018

7/6/2018 7:29:00 AM
State's merit pay system needs reform

It's a little bit of sticker shock - actually, a lot of sticker shock - to find out that state government has just handed out $11.6 million in bonuses - close to $2,500 for each of about 4,700 state workers.

It's just in time for a nice vacation, and that kind of money will sure buy a lot of fireworks.

Of course, fireworks ought to be exploding over the state's bonus program itself, otherwise known as Discretionary Merit Compensation (DMC). The annual costs of this program are going up, it is structured as a bureaucrat's dream come true, and there is no transparency or apparent fairness in the way the DMC is administered.

It might better be described as a Meritless Taxpayer Boondoggle (or MTB, in Bureaucratic Acronym Speak).

Not that it should be repealed. But the program needs to be fixed and fixed quickly.

There's no question that a system of merit compensation, if structured fairly, can boost incentive to work hard, save taxpayers costs, and provide recruitment and retention of good workers. And there is no question that even the current flawed program is better than the old union pay schemes that guaranteed raises mostly based on seniority.

When seniority rather than skill, talent, and hard work is the measure of reward, then a pool of unproductive and less skilled and talented workers is the end result. Especially in the public sector, the more talented and harder workers will make haste to the private sector, where they can be rewarded for what they accomplish rather than for how old they are.

Still, the current discretionary merit compensation program goes a long way to the other extreme, that is, toward a system that awards workers based not on merit, actually, but on their affinity with those who dole out the bonuses.

The unions say the program smacks of favoritism, and that the criteria are way too subjective to be fair, and there is truth to both those criticisms.

For example, the state compensation plan merely requires, for most employee categories, that employees have received a performance evaluation in the previous 12 months and were not rated below satisfactory, or have been disciplined in the previous 24 months.

Looking at the DNR's 2017 criteria, specific to that agency, the criteria then were no less vague. The employee had to have completed a six-month probationary period satisfactorily, have received at least a rating of "solid performance," had submitted his or her self-assessment in a timely fashion, was not on a performance improvement plan, had not received a letter of expectations in the past 12 months, and had not been disciplined in the prior 12 months.

In other words, all the worker has to do to qualify for the bonus was to be average. It's essentially a reward for average work, not outstanding work, as the Walker administration claims. As such, it will do absolutely nothing to incentivize retention or recruitment.

Then, too, most workers are "average" in the sense that the majority forms a norm, a range of expected performance. Because the agency can only give 15 percent of its workforce bonuses, the managers must then subjectively and without any announced performance goals award the bonuses based on a formula that can only be known as whim.

And that means, as the late union leader Marty Biel pointed out, some workers with the same job evaluation and doing the same work as those who got a bonus will be left out.

And they have been. Not real good for morale.

From the conservative point of view, the set-up is a bureaucratic nightmare. That's because the bureaucrats making the decisions will often be long-embedded big-government activists, and when separating the average workers who will get bonuses from the average workers who won't - in other words, when pitting their workers against each other - it's a cinch we know what one major factor they will consider: their ideological commitment to big government.

Oh sure, we know they are supposed to consider the length or frequency of the outstanding performance (how long have they fought for ever more regulation of the people?), the overall significance or importance of the employee's work product to the organization (are they deeply involved in environmental regulation as opposed to state parks or forestry), and the regularity with which the outstanding performance or unique contribution is demonstrated (how consistent is their resistance to the elected will of the people?).

So the program does smack of favoritism, just not in the way Biel imagined. Instead, it's a prescription for rewarding those most friendly to the bureaucratic agenda with a back-door pay increase.

That might not be true with every bonus handed out, but it will be often enough. As Wisconsin Watchdog reported, in 2014 seven of 11 employees in state superintendent Tony Evers's cabinet, essentially his inner circle, received an additional $30,230 in bonus compensation over the two previous years.

Outstanding work!

For taxpayers, the concern is two-fold. First there is no transparency to the process. Workers who get left out can't challenge the decision, which is made behind closed doors in a state agency - and it's a decision not reviewed by anyone. The public can't see the performance evaluations.

There is no accountability.

There are also cost concerns. If an agency like the DNR can come up with $860,000 for bonuses, apparently from vacant positions, then there are problems. Either the agency is squeezing real staffing needs to preserve that pool of money for something else, or it is unnecessarily paying overtime to cover the vacant position's workload, or the position needs to vanish from the budget altogether.

In other words, keeping positions vacant to pile up money creates a slush fund for bureaucrats that should not exist, and the agency should not be allowed (and even directed) to spend such money on bonuses, for it is simply a bureaucratic redistribution of salary dollars for purposes other than what was intended in the budget process.

It is a fundamental flaw.

That flaw obscures just how much money the state is spending on salaries. Time and again we hear state officials tout how much money this agency or that is saving by keeping positions vacant, when it turns out - when you see they spend it on overtime or bonuses - taxpayers aren't really saving anything.

The time for reform of the discretionary merit system is now. We have a few suggestions.

First, establish specific rather vague performance goals for each position - goals that can measured. In other words, makes the program a structured rather than a discretionary one.

It's pretty simple: Establish specific performance goals through participatory exercises and if the employees hit the markers, they get the bonus. Nothing discretionary there, and the bureaucratic power stick is taken away.

Second, the process must be transparent. Publication of the performance goals is not the same as releasing a performance evaluation. Make the process entirely visible, both inside an agency and to the public.

Finally, make sure the program is financially sustainable and does not encourage slush funding. The current system actually encourages waste. Bureaucratic managers want to reward their outstanding employees (their allies); they need money from within their department to do that; they end up shortchanging taxpayers and programs by diverting funds internally.

Perhaps the state should end that game by funding all bonuses through the state GPR. The program costs would double on one side of the equation, if we look at this year's numbers, but that would be compensated for by keeping internal agency funding at needed levels and for their intended purpose, while a transparent structured program just might create higher productivity and even more taxpayer gains.

Surely a merit-pay bonus system is better than a union-run pay scheme whose actual goals seem to be waste and laziness. But not every merit compensation program is created equal, and, in a bureaucratic setting, discretionary ones are a poison pill.

Fortunately, merit compensation programs can be fixed. Let's fix ours now.

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