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Remuneration and Performance Management for Chief Executives

In the 2013 Review the process for setting performance expectations and remuneration was rated as ‘needing improvement'. In particular the process required more effective alignment with delivery of the reforms needed to deliver BPS across the system.

Since the 2013 Review, SSC has redesigned the remuneration framework for Chief Executives as well as the performance management process. The intention of the redesign was to improve alignment between performance expectations, Government priorities and system stewardship obligations by providing a clearer link between Chief Executive expectations, performance and their reward. There are now common performance expectations for all Chief Executives, which are designed to encourage a more collaborative focus on system-wide leadership and results and in particular, achievement of the Better Public Services programme.

Detailed guidance has been provided around the process for measurement of performance, which has been prepared by SSC to assist its own staff and Chief Executives, with advice from a reference group of Chief Executives. It is clear and easy to follow, with flowcharts and diagrams to explain and support the process. Chief Executives are required to develop their own metrics by which the performance of their individual agencies is measured.

The new remuneration and performance management process was introduced in January 2014 and has not yet been in place through a full annual cycle. Chief Executives are generally in favour of the changes to the structure and support the performance expectations. The development of these has been through effective consultation and co-creation, using a reference group of Chief Executives. This approach was well received by Chief Executives. All I spoke to understood the reasons for the focus on system stewardship and achievement of BPS Results. The new framework is regarded as a more ‘holistic' approach to performance remuneration.

Within SSC the Sector and Agency Performance Group (SAPG) has introduced a more robust process for assessing performance and ensuring a consistent approach across all agencies. However there is some dissatisfaction with the way in which this performance management process has been implemented.

All of the Chief Executives I spoke to considered that they were required to provide too much detailed information for the assessment last year. The process was too intensive and time consuming and seemed to some Chief Executives to be more like auditing than a management or review process. For example, having designed their own metrics for measurement of their agency's performance, some CEs felt that these were then discarded and/or redesigned by SSC.

The SAPG have recognised that improvements need to be made to this process, both for performance reviews and for remuneration setting. Following a ‘lessons learned' review they have identified the following actions needed to improve the process and have reconstituted the Chief Executive reference group to assist:

  • Simplifying the CE self-review template
  • Developing more consistent and targeted reporting requirements
  • Further development of the system-wide stewardship expectations
  • Providing greater clarity on how performance payment decisions are made
  • Building capability to support CE development.

Experiences of Chief Executives in dealing with the individual Deputy Commissioner or Assistant Commissioner assigned to them is varied. Some have built up a good rapport and find their interaction valuable. Others are less convinced at the value of the relationship. There is a view expressed by some Chief Executives that their monthly meetings are more about process and not enough about direction of travel or development of capability.

The issue is not so much about the capability of individual DCs and ACs, but whether the SAPG model still fits with the BPS model of performance and delivery. For example the current model is still focussed on a one-on-one relationship between a DC or AC and the particular Chief Executive and agency. This may not effectively address the wider culture and system changes that Chief Executives must achieve in order to deliver citizen-centric government services. It is not ‘business as usual' and the support that Chief Executives need to develop these skills and then implement them may need to be different in design and more bespoke than currently offered through SAPG. One size does not fit all.

We noted in the 2013 Review that there was a tension between the performance management and monitoring function and the development role, both of which are managed by the SAPG within SSC. This tension remains. In my view there would be merit in more clearly separating these functions and reconsidering what skills are required to perform them.

Some suggestions for consideration are:

  • A closer alignment between PIF Reviews and 4 year business plans, against which Chief Executives' management of their agencies should be considered. For instance, if each agency undergoes a PIF Review in the CE's first year, the next iteration of the business plan should explicitly incorporate the areas for improvement and the CE's performance in addressing them could be the focus of the SSC performance assessments in subsequent years.
  • Use of a mentoring system where each Chief Executive is allocated a mentor or coach, determined with reference to their individual developmental needs and experience. For example, a first-time Chief Executive could be mentored by a current senior Chief Executive. A more experienced Chief Executive might be better supported by a former Chief Executive or a professional business coach. This could perhaps be facilitated through the Leadership Development Centre (LDC), which is a joint venture between the State Services Commissioner and state sector Chief Executives. LDC and SSC could co-design and organise delivery of a bespoke development plan for each Chief Executive upon appointment.
  • Recruiting with a greater emphasis on business analysis skills in the analytics team in SAPG would better equip the team to determine measures and assess agency results, in collaboration with Treasury. This information could inform the mentoring discussions, but the mentors would not be responsible for managing or assessment of the Chief Executive’s performance. They would provide advice and guidance to assist with their development or whatever support they required to lift their capability.

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