35 their own performance-pay arrangements. Performance-related pay is an integral part of the more radical agency reform countries. New Zealand, for example, uses it for all staff levels. Performance ratings and position in the salary range determine performance pay increases.' A few examples of attempts to modify performance-pay schemes to reward group rather than individual performance are worth noting. The Agricultural Research Department in New Zealand allocates annual pay bonuses to divisions for distribution among competing work teams. Group awards are being used in limited parts of the French and Swedish administrations, and in the U.K. some Framework Agreements permit Next Step agencies to introduce alternative group performanwe-pay systems. The Vehicle Inspectorate Agency, for example, is currently experimenting with group bonuses. In the U.S., the OPM-managed Pacer-Share Demonstration Project is using a productivity gainsharing system to distribute a portion of productivity savings to employees of McClellan Air Force Base.

The use of non-wage incentives to motivate civil servants is also emerging as a variant on performancc-pay approaches. Cash awards to employees offering suggestions to improve the organization or enable savings are one such mechanism. In the U.K, for example, departments provide financial incentives to encourage staff to make helpful suggestions. When a suggestion is implemented, staff receive as much as 10% of the savings obtained during the first year.4 These variants aside, the deliberate movement in many developed countries toward individual performance-related pay systems is proceeding despite unresolved questions about the costs and benefits of this approach. Though widely used in the private sector, the concept still represents a significant departure for most civil services. There are numerous claims for performance pay: it underpins the concept of accountability; it provides alternative mechanisms for staff rewards when promotion prospects are limited; it affords the public sector flexibility in competing with private markets for scarce skills; it builds civil servants' morale in an age of public sector bashing; it provides a rational means for allocating scarce personnel expenditures; and it lirovides a means, short of major public service pay adjustments, to redress private-public pay differentials and internal government wage compression.

Critics of performance pay point to a range of flaws. The most serious critiques claim that performance pay over-emphasizes short-term performance over long-term strategic objectives; produces more demotivated losers than motivated winners; is plagued by measurement problems, biasing reward unrealistically toward quantitative and financial measures; encourages standardized norms that inadequately capture the differences in civil service jobs; and is management-intensive and costly.

43Awards for administrative and support staff range from 2% to 10% of base salary, awards for advisory and professional staff range from 2% to _20%_ of base salarv. There is no increment for poor performems. The Chief Executive's performance is reviewed annually by the State Services Commission against the terms of agreement that were negotiated during the previous year with the Minister. Lke other higher civil servants, CEs are on fixed-term contracts which may be terminated for unsatisfactory performance. In practice, however, contract termination happens rarely if at all.

44According to one survey, in 1981, these schemes resulted in average savings of over L760,000 in large departments with approximately 40,000 employees.