Faulty Incentive system

7/27/2019 Faulty Incentive system

1/4

Ads by Google

5 Signs of Alzheimer'sDoctor: 5 Warning Signs You're About to Get Alzheimer's Disease

Logo

Source Quality Productswww.chinasourcingfair.com

Visit 12 to trade shows in HK Re ister for free entr bad e now!Latest Stories

No Free Lunch

A faulty incentive system

By Cielito F. Habito

Philippine Daily Inquirer

11:08 pm | Monday, September 30th, 2013

Recommend 70

It is argued that the public service attracts too many incompetents and people with less than noble

intentions because government salaries do not amply reward excellence and professionalism. As they

say, if you pay peanuts, youll get monkeys. Look at our neighbors Singapore and Malaysia, for

example. Government employees and officials there earn salaries competitive with or even better

than those in the private sector. Not surprisingly, the quality of the civil service is high, and

corruption in the bureaucracy is not among their most prominent problem. Notice, by the way, how

one would not easily find Singaporean or Malaysian bureaucrats in international agencies like invarious UN bodies or World Bank. But dining in the cafeterias in these organizations offices abroad

would make any Filipino feel right at home, with our language dominating the chatter all around. For

obvious reasons, such institutions have been prime employment targets for our government people at

all levels.

Sadly, our government has traditionally been a place where crime does pay. The raging pork barrel

scandal is said to be only the tip of the iceberg. The culture of corruption has been so deeply rooted

that clean and honest officials out to change the system often end up being the casualtiesor

eventually get corrupted themselves. Our political and electoral system, where it seems the only way

to get into elective office is to invest huge amounts of money in ones campaign, breeds behavior

geared toward recovering the large investment made. I have heard too many people in government,

whether elected or appointed, rationalize their errant behavior with a flippant What are we in powerfor? Ours is a system wherein integrity, excellence and professionalism dont get amply recognized,

much less rewarded. But one reaps handsome rewards if he is prepared to engage in opportunism and

outright dishonesty.

It is not just in the public sector where the incentive system is flawed. In business, many tend to

operate in a culture of rent seeking, rather than one of competition and innovation. Rather than invest

in improved efficiency and productivity, too many businessmen find it easier to spend money to

lobby or bribe public officials and policymakers into providing them opportunities for making large,

unearned profits. These opportunities could come in various forms: award of government contracts, a

Obama addresses military as govt shuts

2 85 74

A faulty incentive system | Inquirer Opinion http://opinion.inquirer.net/62401/a-faulty-incentive-sy

of 4 10/1/13 2:23


2/4

policy environment that eliminates competition (e.g., via high protective tariffs or import

restrictions), or lax implementation of rules and standards that let firms get away with cutting costs at

the expense of the welfare and safety of the general consumer.

How do we transform the whole incentive system to one that promotes honesty, integrity, creativity

and excellence, rather than one that breeds corruption, incompetence, and inefficiency? A crucial

underlying principle is competition, and not just in the context of the private enterprise sector. In

government, there are various ways of applying this principle. First, government salaries could be

made competitive with those outside of government, from the top officials down to the lowest rankand file. There has been some progress on this. As of 2008, the Civil Service Commission observed

that government salaries at the lowest level already exceeded those of their private sector

counterparts by around 20 percent. But public sector salaries at the middle and top levels were still

30 and 70 percent lower than private sector counterparts, respectively. Closer alignment must

continue being the ultimate goal, but we must also find a way to rid the bureaucracy of misfits who

dont deserve to be rewarded with increased pay.

Another way is to organize work in the bureaucracy so that employees are led to compete, rather than

collude. A Nobel Prize economist had long advanced the notion that front-line services, as in the

issuance of certain clearances or licenses, must be done in a parallel rather than series arrangement.

In the latter, which is typical of our government offices, every transaction goes through a series of

employees, each one responsible for a step in a single process track. But there is merit in having each

of them take charge of all (or most) steps of the required transaction in a parallel arrangement of

several alternative (and competing) tracks. It wouldnt take long for both their supervisors and the

public to see who among those employees are less efficient, thus slower, than the others. With

appropriate sanctions and rewards, efficiency is bound to improve. Furthermore, a true merit-based

incentive bonus system must replace the common practice of giving incentive allowances across

the board, making the name a misnomer.

In the private sector, economic reforms in the 1990s were mostly geared toward heightened

competition by eliminating monopolies and cartels in key sectors (such as telecoms, shipping,

domestic airlines, etc.) and liberalizing trade and investment. The positive results, especially in

terms of improved service and lower prices, have since been quite evident. There have long been

calls for legislation for a comprehensive competition policy to unify all policy measures in this

direction, as there remain many more sectors and industries in need of more active competition.

Finally, excellence and superior quality need to be prominently recognized and rewarded, whether in

the public or private sector. The Lingkod Bayan Award in government, and the Philippine Quality

Awards and Golden Shell Awards in the private sector are examples that have served this purpose.

We need more of such.

* * *

E-mail: [email protected]

Follow Us

70

Recommend

74

2

Google


of 4 10/1/13 2:23


3/4

More from this Column:


Education for entrepreneurship

Competition policy and the poor

Life without pork

Breaking out

Love the One Youre With(Modern Vacation Home Rentals)

Whats Hot: Villa Rentals for YourLate-Summer and(Robb Report)

Israel's army spawned more technologymillionaires than(TheGuardian)

Boeing Turns Old Fighter Jets IntoDrones(redOrbit)

The U.S. Airline Pilots Who BarelyMake Minimum Wage(Skift.com)

Top 7 focus areas in SMB businessprocess automation(KiSSFLOW)

Naturally Comfortable Luxury Beds(Robb Report)

Father Saved After Passing OutBoarding A Plane

(redOrbit) The Secret Modernism of Cape Cod(Modern Vacation Home Rentals)

Buried Seawall Helped Protect NewJersey From Hurricane(redOrbit)

The Dump That Became a Tourist Site(Modern Vacation Home Rentals)

Southern Comfort(Robb Report)

Ads by Google

Cars For Sale PhilippinesBrand New & Used Cars For Sale At Sulit Cars Buy And Sell Philippines

From Around The Web

Recommended by

Recent Stories:

Editorial cartoon, October 1, 2013

Economic blemishMusic and family


Toxin-laced symbols

Let her come

Good sense now a vice

Lessons from a departed sister

A discerning Church

Travel woes of commuters

Complete stories on ourDigital Edition newsstand for tablets, netbooks and mobile phones; 14-issue

free trial. About to step out? Get breaking alerts on your mobile.phone. Text ON INQ BREAKING to

4467, for Globe, Smart and Sun subscribers in the Philippines.

Short URL: http://opinion.inquirer.net/?p=62401

Tags: nation , news , pork barrel scam , public service , world bank

Factual

errors?

Contact the Philippine Daily Inquirer's day desk. Believe this article violates journalistic ethics? Contact the


of 4 10/1/13 2:23

Faulty Incentive system

Documents

Transcript of Faulty Incentive system