Tuesday, January 3, 2012

On Ministerial and Civil Service Pay - April 2007 - Denise Phua

by Denise Phua Lay Peng on Sunday, 22 May 2011 at 22:41 (source)

Denise Phua Lay Peng

Strange how life turns out. This was my parliamentary speech on Ministeral and Civil Service Pay on 9 April 2007.....

Sir, pay is a very personal issue. In all my years in human resource and leadership work, I have never met anyone who told me their pay is enough, whether they belong to the lowest or the highest-income strata.

When asked once, "How much money is enough money?" John D. Rockefeller, one of the wealthiest men in U.S. history replied, "Just a little bit more!"

That is why management philosopher, Charles Handy, wrote about the ‘Doctrine of Enough’ in his book, ‘The Hungry Spirit’. He recommended that each of us need to find our own personal level of ‘enough’ so we can be liberated to pursue our dreams and purpose without being chained to our appetites.

Sir I wish to make 3 key points today. (1) I believe the spirit of serving and giving is still alive in Singapore. (2) We need to be careful not to leave behind political and civil service offices that combine excessive levels of Power and Money. (3) If Government wishes to benchmark public servants with the Private Sector, then there are some principles around Compensation Practices which should be adopted, to simulate more closely private sector norms.

First Sir, why I believe the desire to serve is still alive in Singapore.

This week is a very special week for me. 2 fellow volunteers with me, Linda Kho (a Managing Director of a training consulting firm) and Ng Sock Kian (a Vice President in a bank) decided to take the plunge, turned their backs on the private sector to work full-time in the non-profit special needs community. They join another ex-Goldman Sachs HR director, Goh Boon Keng. All 3 took pay cuts from half to two-thirds of their pay to serve in a cause they believe in. I share their names, not to put a badge of honour on them, but to illustrate this point.

Minister Mentor is right in many things about Singapore. But his opinion that the real world of Singapore does not surface leaders who are willing to make sacrifices to do something they believe in, is a tad too pessimistic. In fact, I know of a number of people who have tasted corporate success and are willing to rise above their perks and power suits and move on to serve in the non-profit sector. Not all of them have left and some are still looking for an inspiring vision and team to lend their talents to. I have served with many volunteers who not only give of their time but their money.

The spirit to serve without asking for much in return is still alive in Singapore and I hope we will never do things to quench it. Many of us still admire the courageous political heroes who took on Singapore’s British colonial masters then, to create a nation of our own.

Next, Sir, I would like to touch on Power and Money – the potently addictive motivators behind many human behaviour. And to caution this House that we need to be careful not to leave behind political and civil service offices that combine excessive levels of Power and Money.

Now, I know the general argument is this: If we don't pay leaders high enough, we will not be able to attract the right people. I ask the House to consider this contrarian view. I say that ‘If we do not balance and we concentrate too much Power and Money in top public offices, we might NOT attract the right people. On the contrary, we might attract the wrong people.’

Sir, public office holders and top civil servants wield the most power in our country. This power to swing national policies and even power of king-making does not carry a price tag that is easily written and is a very significant component of the position.

Besides power, money is the other top motivator behind many people. Put together, power and money can be potently addictive. As responsible leaders, we must be careful not to leave behind a structure that combines power and monetary rewards to such high levels that incumbents are so handcuffed by this lethal combination that they find it hard to let go. And worse, we create an office that potential candidates are so attracted to that they may go for broke just to get there, whether they are suitable or not. This potentially can do more harm than good to Singapore – something that does not augur well for our country.

My next point, Sir, on public versus private sector.

Working in the Public Sector is not exactly the same as working in the Private Sector; and I don’t mean state-owned enterprises. Ex-permanent secretary Mr Ngiam Tong Dow was yesterday quoted in this House on how he did not have to lose sleep over the bottom line when he was serving in the civil service.

One of my fellow volunteers in the Enabling MasterPlan for Disabled and a Managing Director of a foreign bank told me that his job ‘can disappear tomorrow’ if he does not perform or if there is a corporate re-organisation.

When I was working in a local conglomerate and involved in company-turnaround projects, I witnessed first hand the high drop-out rates of top executives-turned-entrepreuneurs who could not stomach the tough work of producing consistent enough profit levels that qualify them for public listing.

Many Singaporeans know the painful journeys that successful techno-preneurs like Sim Wong Hoo (Creative Technologies), Olivia Lum (Hyflux) and Wong Ngit Liong (Venture Manufacturing) went through before they finally got their millions. Hence, it is the general perception of many Singaporeans that the degree of job security in the Singapore public service is relatively high and working there is not exactly working in volatile Wall Street.

Sir, not all highly paid CEOs of legal firms or banks are top candidate choices to be ministers or top civil servants. By the same token, not all top political and civil service leaders may excel in the private sector. So I do agree that those precious few who are able to thrive in both public and private sectors are Singapore’s crown jewels and are worth millions of dollars.

Even so, I think once that special leader crosses over to serve in the public office, it is futile for him to keep looking over his shoulders to yearn for what he could have made. Alan Greenspan, economist and former U.S. Federal Reserve Chairman, who spent almost 20 years serving 4 Presidents, was reported to have accepted an annual pay of only US$180,000/-. When he finally did retire in 2006, he still had a fruitful career due to his influence and knowledge. He donated free service to the UK Treasury and is now also a sought-after speaker with a price tag of US$100k per talk, something I have no problem with. Alan Greenspan is a good illustration of a respected and skilled leader who is highly capable of working in the private sector but chose to serve his country below his market value.

And finally, Sir, if Government wishes to pay and benchmark public servants against Private Sector pay instead of other governments, then it should simulate the work environment to as close as that in the Private Sector. In addition, start adopting some principles around Compensation Practices that resemble more closely the private sector.

In this regard, I propose 5 Compensation Practices for consideration:

Practice 1. Set up an Independent Senior Salaries Review Body comprising independent representatives from various key sectors in Singapore.

The principle of not writing one’s own paycheck is very key in addressing public disquiet on this issue. The UK Senior Salaries Review Body which proposes political and civil service pay for instance, comprises senior executives from private sector, HR and finance consultancy, academia and so forth.

Public perception of the body’s independence is just as critical as the body’s real independence. In the corporate sector, there is already an uproar over how some CEOs influence their boards to write themselves excessive pay checks, even to the extent of being paid hefty sums upon exit due to poor performance. A 2005 Study on ‘CEO Skill and Excessive Pay’ by professors from Stanford, Wharton School and the New York University concluded that particularly in big stable firms, a high salary does not necessarily mean that a CEO is more competent.

Practice 2. Establish a Line of Sight that shows clearly the link between Pay and Performance of political and civil service leaders.

Make Key Performance Indicators transparent so the people of Singapore know how the leaders have contributed to PM’s vision of an inclusive and vibrant Singapore in which no one is left behind.

Do not simply use one global helicopter KPI like the size of Singapore’s GDP as the basis for performance-based components like bonus. How does the Health Minister, for instance, see his ministry’s performance linked directly to the GDP?

Compensation best practice dictates that there be a clear line of sight between one’s pay packet and direct performance. In the case of public servants, performance-based pay can tie in to at least 3 tiers - (a) country performance, not only economic; (b) each ministry’s performance; and (c) at individual’s performance.

Surely performance indicators like customers’ feedback to major public services; no. of jobs created for local Singaporeans; percentage of Singaporeans in the lowest income bracket; no. of Singaporeans who chose to migrate etc are all KPIs that can be incorporated in the balanced scorecard of our top leaders.

Practice 3. Adopt a more commonly acceptable Salary Benchmarking formula.

In the private sector, it is rare to see the use of the current salary benchmarking formula which targets only a very small number of top wage earners. I guess one key questionable underlying assumption of the current formula is that 100% of all political office holders and every Perm Sec and Administrative Officer will surely end up as the top wage earners in Singapore. Most firms I know set their target competitive rates at either the 50th, the 75th percentile of target employee categories in selected companies and industries, but never at such a small number of top wage earners.

Practice 4. Adopt a Broader-Band Pay Range for each position to cater to appropriate salary levels for incumbents ranging from those with entry-level skills to those critical-skills experts or long-term outstanding performers. Hence, using $1.2m as a midpoint for a minister’s pay and a min-to-max spread of 60%, the minimum pay for a entry-level minister can be $840,000 (30% below mid-point); a mature performer gets $1.2m and a consistent top-performer gets close to $1.56m (or 30% above mid-point).

Practice 5. Cultivate more lasting and non-monetary Motivators to usher in and retain good people to join the public sector. Simply throwing money at a problem does not solve it. There is no quick-fix solution to talent attraction and retention and there are numerous best practices in this field. Many employers, though, find it hard to walk the talk.

In a March 2007 Harvard Business Review article, ‘What It Means to Work Here’, the authors lament at the HR equivalent of keeping up with the Joneses. Authors said that in their quest to find and retain top talent, organizations often to try to match competitors’ salary offers and training opportunities. They forget that people will become long-term deeply engaged employees only if their work experience is what they expect it to be; and they are intrigued and excited by a vision they find inspiring; a leader they want to follow and work roles that match their passion and talent.

Sir, may I even suggest that for the sake of Singapore, we should release the 32-year-olds who after serving their bonds, may want to respond to a different drumbeat or simply to expose themselves to a different work environment whilst they are still young. If they stay on because they are handcuffed by a super pay scale or their pension, it is a lose-lose situation for them and the government.

In conclusion, Sir, the issue of pay is a sensitive one. Someone earning $1,000/- can never fathom another who is earning $10,000/-. A person earning $10,000/- may never understand how another who is earning $100,000/- a month feels it is not sufficient.

For someone like MM who will be remembered by all of us as the father of Singapore, how does one even find a price tag big enough for his contribution?

What is enough? We may never agree.

But let me end off with the writing of Charles Handy who said this: “The philosophy of ‘enough’ cannot be imposed on a society. It is a matter of norms, not law. But norms are set by the elite, whose example sets the fashion. What the top people do today, the middle level imitates tomorrow, and the bottom aspires to, some day.”

The people who follow us are watching us. Our young people are watching us. So is the People Sector where many are professionals who volunteered their service and money unconditionally all these years.

Sir, I urge our leaders to give some more thought on what is a reasonable ‘enough’ for top leaders’ salaries whilst considering the 5 compensation practices I proposed.

At the same time, I urge that together, members of this House will make it a priority to ensure that everyone in Singapore has a real chance of also being able to reach their personal level of ‘enough’.

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