MODULE 5

UNDERSTANDING AND CREATING INCENTIVES

Introduction

Incentive systems critical for long term capacity development

Important part of improving performance and deepening democracy

Developing suitable incentive systems is complexdevelopment theory human resources management theorysociologyeconomics

Non financial incentives are as powerful as financial incentives

Different motivators for all individuals and organisations

Must understand all 3 levels of society

Importance of the enabling environment

Society/enabling environmentSecurity, rule of law, culture, civic engagement, land tenure, free press, strong civil society

OrganisationHistory, mission, culture, incentives

IndividualIntrinsic motivation, morals

Motivations and the enabling environment

Sense of caring Sense of being

Sense of fairness, existence of criteria and authority to prevent unfair dealings and encourage fair behaviour, social pressure

Internal motivation - do good work

Motivations - initiations, direction, intensity and persistence of behaviour

Society/enabling environmentOrganisation

Individual

Incentives and incentive systems

Incentives / incentive systems

Society/enabling environment

Organisation

Individual

Effe

ctiv

e

Effi

cien

t

Sus

tain

able

Acc

ount

able

PERFORMANCE

INNATE MOTIVATION TYPES AT ALL LEVELS

Trigger Motivations

$ + $

Types of incentives

Non financial incentives have a bigger impact at higher levels

Physiological/basic needs

Safety needs

Social needs

Esteem needs

Self actualisationFinancial incentives tend to meet basic needs primarily

Individual incentives

Individual incentives

Financial incentives

Pay Base wage/salary, Bonuses, Stock options

Other direct financial benefits Insurance, Pension, Allowances, Materials

Indirect financial benefits Subsidies, Child care, Training

Non-financial incentives

Job security, social privileges, reputation, re-employment after retirement, holidays, flexible working hours, sabbatical, study leave, planned career breaks, counselling, recreational facilities

Organisational incentives

Organisational incentives

Financial incentives

Internal Group based performance awards and pay

External Benchmarking and competition among organisations

Non-financial incentives

Internal Autonomy; supervision schemes; recognition schemes; training and professional development; leadership; team-building; transparent and reliable promotion schemes; supportive supervision and feedback; performance management tools; staff participation in decision making processes; horizontal and vertical communication among staff; quality improvement teams and building a quality culture; participatory problem solving assessments and problem-solving processes

External Accountability schemes: citizens’ charters, service delivery surveys etc.; market exposure; financial responsibility; governance: transparency, preventive anti-corruption measures, responsibility for decisions; regulatory mechanisms

Good practice – lessons learned

Cambodia: Rectangular

Strategy

10-15% inc in pay

Priority mission group

Parallel donor system undermined pay incentivesIncreased pressure on other sectors

Tanzania: Selective Accelerated Salary

Enhancement

Target specific staff – most impact on bottlenecks in service, sign performance certificate, assessed annually

Project took too longSalary increase no longer competitivePerformance reviews not done

Public service pay reform

Harmonised approach

Thailand: Rural pay incentives

Rural doctors paid more than urban doctors + given different status, housing, peer review + recognition

$ + $ incentives

Good practice!

Rwanda: Revenue Authority

Non financial incentives to improve performance of organisation

Uganda: Grant system

Performance Linked funding for local authorities to apply for grants for particular programmes

Brazil: Subsidised education

Demand side funding to increase school attendance Mothers given $6 per child if attend 85% of classes

Increased national pride Support from highest political levels Broad based donor support Clear mandate Agency status, management autonomy Improved corporate values + reputation Successful human resources management Client focus

Grants allocated based on fulfilled conditionsWidely published financials etc.Increased accountabilityStaff more motivated to meet deadlines

Financially stableTargeted poorestStrong partnerships and networksCommunity participationMunicipalities had more autonomy

Incentive dilemmas

$

Do

no

r Government

Better aid management

?$

?$?$

?$

+ + +

?$

?$ ?$

Price awareness

• Costs for service often not available• Other services that are sacrificed not made explicit• Advisable to introduce more price consciousness • Support strengthening aid management • Enter into mutual accountability arrangements

Vicious cycle of double demotivation

Try to work 10/20 x harder

Not possible

Must be better -

reason for higher pay

Self inflated attitude

leave

Demotivated

Demotivated Reduceperformance

Reduced performance

noted

10-20 x salary

Impacts on

leave

Further justification

PIUs and Parallel systems

Donor$

Short term advisors Coaching models Local consultants

Institutional twinningTime-bound gap-filling

• Generally contributed to a lack of fundamental reform• Sometimes try to impose prescriptions onto government

More consistent with positive incentives

Appropriate and optimal mix

Understand the enabling environment

Pay attention to culture and context

Research existing material and non material incentives at all levels• Identify capacity gaps• Create self assessment tools - non-material incentives• Understand the de-motivating factors

Create an appropriate and optimal mix of incentives of different types

Link incentives and good human resource management

Target the right people and organisations• Understand who/where the drivers of change might be

Sequence appropriately

Be creative to create the right mix

In summary

• Collective solutions need to be tailored to local conditions

• Try to support nationally led schemes

• Donors should pool resources + support national schemes

• Government not strong enough to take the lead - collective approach

• No national anchors - collective harmonised solutions

• Avoid at all costs incentive schemes in cash or kind

• Always have an exit strategy planned