Executive pay: why can people still exploit the system?


Another report about lavish executive pay, this time following the resignation of ex-TAFE SA boss, Stephen Conway, highlights once again a lack of transparency and accountability at the top of some big organisations in the public sector.

Following a damning internal report, this recent article, published in Adelaide Now, delves into what’s happened at TasTAFE regarding remuneration and executive pay, such as “bonuses”, incentives and commitments paid out by Conway to friends.  

The findings of the Tasmanian Integrity Commission has reported that Conway allegedly provided favourable treatment — including exorbitant executive pay rises and bonuses — to deputy chief executive Lori Hocking, while they working together previously at TasTAFE.

A one off?

The investigation raises a number of questions about TasTAFE and the “good governance” relating to both the TAFE and the owner (the government).

Firstly, why weren’t there processes in place to determine what these positions contributed to TAFE (valuation of the position). Secondly, what was Hocking’s capacity to deliver against this position hence her value vs the designed position? Tools are available that assist with position design and provide precise valuation of the position and the applicant or incumbent against this position (depending on the market place and market positioning of the organisation). Why wouldn’t an organisation like TAFE SA have this type of tool, or at least have access to valuation tools for executive pay through the SA government?

(Overpaying executives is one thing, but what about underpaying staff? Here are 7 common mistakes organisations are making.)

Organisational tools

These tools are not new: the Australian Productivity Commission has referred to them as putting science back into organisational and people management.

Modern approaches to human capital management include systems that provide size and value for a position and values the applicants or incumbents fit against the designed position and reports on any capability/competence gaps. These systems provide current value as well as an assessment of the potential to develop into the future position – growth-based succession planning.

There would not have been a problem with Hocking’s $55,000 salary increase provided that the position (contributing element) changed in value by that much – and Hocking was shown to have the competence to deliver against the higher value re-designed position.  

The variable reward based on performance is determined by the contribution of the incumbent above and beyond the expectations for the position (i.e. base salary is for performance at the target levels).

Therefore, if an incumbent simply meets the target performance measures, this would not attract a performance payment. Put simply; the performance management system will reward the incumbent if they are performing beyond expectation, as well as identify development needs if they are underperforming in all or any measure.

If an incumbent performed at high stretch in all required measures and their position was truly contributing at $150,000, then a performance pay of 20 per cent of the base i.e. $30,000 would be possible.

However, while performance pay may be based on a percentage of the base salary as this is calculated position contributing value, performance pay never impacts or changes the base salary or it becomes double dipping.

And performance pay is most definitely not an entitlement; it is earned. Therefore, Hocking’s acquisition of “a commitment of a $6000 bonus on each anniversary of her appointment” is poor and unethical HR practice.

 

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Executive pay: why can people still exploit the system?


Another report about lavish executive pay, this time following the resignation of ex-TAFE SA boss, Stephen Conway, highlights once again a lack of transparency and accountability at the top of some big organisations in the public sector.

Following a damning internal report, this recent article, published in Adelaide Now, delves into what’s happened at TasTAFE regarding remuneration and executive pay, such as “bonuses”, incentives and commitments paid out by Conway to friends.  

The findings of the Tasmanian Integrity Commission has reported that Conway allegedly provided favourable treatment — including exorbitant executive pay rises and bonuses — to deputy chief executive Lori Hocking, while they working together previously at TasTAFE.

A one off?

The investigation raises a number of questions about TasTAFE and the “good governance” relating to both the TAFE and the owner (the government).

Firstly, why weren’t there processes in place to determine what these positions contributed to TAFE (valuation of the position). Secondly, what was Hocking’s capacity to deliver against this position hence her value vs the designed position? Tools are available that assist with position design and provide precise valuation of the position and the applicant or incumbent against this position (depending on the market place and market positioning of the organisation). Why wouldn’t an organisation like TAFE SA have this type of tool, or at least have access to valuation tools for executive pay through the SA government?

(Overpaying executives is one thing, but what about underpaying staff? Here are 7 common mistakes organisations are making.)

Organisational tools

These tools are not new: the Australian Productivity Commission has referred to them as putting science back into organisational and people management.

Modern approaches to human capital management include systems that provide size and value for a position and values the applicants or incumbents fit against the designed position and reports on any capability/competence gaps. These systems provide current value as well as an assessment of the potential to develop into the future position – growth-based succession planning.

There would not have been a problem with Hocking’s $55,000 salary increase provided that the position (contributing element) changed in value by that much – and Hocking was shown to have the competence to deliver against the higher value re-designed position.  

The variable reward based on performance is determined by the contribution of the incumbent above and beyond the expectations for the position (i.e. base salary is for performance at the target levels).

Therefore, if an incumbent simply meets the target performance measures, this would not attract a performance payment. Put simply; the performance management system will reward the incumbent if they are performing beyond expectation, as well as identify development needs if they are underperforming in all or any measure.

If an incumbent performed at high stretch in all required measures and their position was truly contributing at $150,000, then a performance pay of 20 per cent of the base i.e. $30,000 would be possible.

However, while performance pay may be based on a percentage of the base salary as this is calculated position contributing value, performance pay never impacts or changes the base salary or it becomes double dipping.

And performance pay is most definitely not an entitlement; it is earned. Therefore, Hocking’s acquisition of “a commitment of a $6000 bonus on each anniversary of her appointment” is poor and unethical HR practice.

 

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