How to end the era of public employee entitlements

As tax revenues plummet and local governments struggle to maintain services without raising taxes, they might consider saving money by changing their employee compensation programs from ones that guarantee certain pay and benefits to pay-for-performance programs. However, making the change would be a systemic shift for many that would first require organizations to clear an emotional hurdle.

Between 1997 and 2007, the number of full-time local government employees grew by 16 percent, while their total wages jumped by nearly 40 percent, according to “Fiscal Challenges Facing Cities: Implications for Recovery,” published by the National League of Cities in November. That cannot be sustained. The common tactic of cutting today’s costs by negotiating unpaid furlough days for employees merely delays the inevitable. A systemic shift must take place.

The first step is combating employee perceptions of entitlement. Public workers need to be persuaded to make the psychological leap from yesterday’s mentality of guaranteed entitlements to a chancier tomorrow in which rewards are based on performance. It will be difficult because emotion often trumps logic.

The way to counter an entitlement mentality is to develop an emotional counter-psychology in the form of a shared mission that rallies employees to a common cause. Instilling that counter-psychology requires communications, action and shared sacrifice. Communications need to be based on an overarching emotional theme that emphasizes the necessity for elected officials, administrators and employees to work together to surmount their shared problems.

Success depends on effective two-way communications: down from administrators to employees, and then up from employees to administrators. That means listening to employees and their ideas for eliminating waste by working smarter rather than harder.

Next, elected and appointed officials need to publicize employee ideas that have been implemented. Over time, workers realize the burden is not simply dumped on their shoulders, but shared by elected officials, administrators and workers alike. The message of effective joint labor/management cooperation must also reach into the voters’ homes. Voters do not have a municipal employee’s sense of entitlement, but they vote for the officials who can deliver needed services while not raising taxes.

Shared sacrifice is essential in combating entitlement. If health insurance deductibles must double, then officials must make the sacrifice first. As a new workplace ethos takes hold, employees will respond. In a period when public budgets are bleeding, the only incentive a public employer can provide for replacing guaranteed pay and benefit increases is a group pay-for-performance program like a gainsharing plan.

Gainsharing rewards employees as a group for improved performance above a threshold predetermined by management. On the average, an effective gainsharing plan has proven to help improve employee productivity and provide better service to the taxpayers.

With gainsharing, worker performance is quantified and given a dollar value. Employees typically receive half the value of their above-threshold improvement, and their public employer the other half. Every dollar paid to employees is thus matched by a dollar saved by the municipality in lower labor costs (less overtime), and reduced material costs (less waste). Employee bonuses have to be earned and re-earned, thereby eliminating any sense of entitlement for pay increases once taken for granted.

Measuring performance in public works or social services not easy, nor is developing an effective communications effort. Fortunately, gainsharing professionals are available to help develop such performance-based pay plans.

Woodruff Imberman is President of Imberman and DeForest, Evanston, Ill., 847-733-0071 or [email protected].