(delivered by Commissioner Nieves L. Osorio during the 2014 HR Symposium held April 24, 2014 at Cebu Waterfront Hotel)

Australian Embassy Minister and Deputy Head of Mission David Dutton, CSC Chairman Francisco T. Duque III, CSC Commissioner Robert S. Martinez, our esteemed speakers and honored guests, and all HR practitioners present here today, a very good morning to all of you.

Today, I will be speaking to you about Strategic HR as seen through the Philippine Government perspective.

What is Strategic HR? If you will review HR theories, you will find that Strategic HR is actually a theoretical framework. In the 80s, HR emerged as an important academic field that fed into its actual practice. What organizations have been doing all this time is most probably what we know as HR and OD today, but the process of defining it and studying its processes has just recently been extensively done.

According to HR researchers Naresh Khatri and Pawan Budhwar, human resource management is “in transition”. Over the years, human resource management (HRM) has shifted from its “traditional, micro-focused role” to a “macro-strategic paradigm in which individual HR functions such as selection, training, compensation, and performance appraisal are aligned not only with the organizational strategy but also with one another”. The term strategic human resource management or SHRM emerged in the 90s as a result of this so-called transition. According to Khatri and Budhwar, SHRM is an approach to HRM that links organizational structure to HR function, considers culture as an important organizational factor affecting HR function, looks at the role of HR competencies in managing human resource in organizations, and regards strategy as key to achieving HRM’s full impact. Strategy in this context refers to HRM that seeks a vertical fit between the HR function and organization strategy, plus a horizontal fit among individual HR practices. Researchers of SHRM say that when HR practices “exist as a coherent system within a particular system strategy”, then it is able to effectively benefit the organization. SHRM is also considered by some researchers as an “overarching framework that guides the integration of individual HR practices—and one would expect an organization having an HR strategy to have consistent and non-fragmented HR initiatives.

Simply put, Strategic HR is when HR processes are integrated and form part of the agency strategy. It is strategic when individual performance is linked to the achievement of organizational goals. Most importantly, it is strategic when there is a results-based performance monitoring system.

In the Philippine context, we have this in the form of the Performance-Based Incentive Scheme or the Performance-Based Bonus, also widely known as the PBB.

Administrative Order No. 25 or the Unified Results-Based Performance Management System was issued. The AO created an Interagency Task Force on the Harmonization of National Government Performance Monitoring, Information, and Reporting Systems. This will also be the basis for determining entitlement to performance-based allowances, incentives, or compensation of government personnel.

 

Over the years, human resource management (HRM) has shifted from its “traditional, micro-focused role” to a “macro-strategic paradigm in which individual HR functions such as selection, training, compensation, and performance appraisal are aligned not only with the organizational strategy but also with one another”.

 

How important is the PBB in performance management and Strategic HR?

HR researchers confirm that ‘compensation is a strategic human resource management issue’, whether it is in the form of wages, remuneration, or reward. The ability of a government to properly implement pay and rewards systems has a strong link in its ability to ‘attract, retain, and motivate’ state workers.

In a study on Malaysia’s government-run centers for indigenous peoples, researchers confirm that when there is strong perception of adequate pay, there is a greater level of job satisfaction among state workers. They further revealed that when employees are consulted about payment and rewards schemes, there is a greater chance of them being having job satisfaction.

In Indonesia, policy makers have linked poor performance of government agencies to low salary scale. They saw the shift from the ‘pay as entitlement’ perspective to the ‘pay-for-performance’ perspective as the solution to the problem. HR scholars say that ‘pay-for-performance’ will link individual performance to organizational performance. It is a more ‘progressive’ approach to pay because it will be based on an individual’s level of expertise and performance, the risk level of the job, and the scope of work. Pay-for-performance may be in the form of allowances, bonuses, and benefits that are geared toward making the employee perform well.

From the Philippine government perspective, we always have to account for fiscal resources. At the same time, we are mindful of our socio-economic situation, and the understanding that government employees have to be able to meet their needs if they are to be good performers in their respective jobs.

‘Do incentive structures affect the quality of the Philippine bureaucracy and is this, in turn, correlated with agency performance?’ This is a question that Toby C. Monsod asked in his paper on incentive structures in the Philippine government. He says that the impact of incentives can be measured through job satisfaction surveys and personnel turnover, plus the corresponding agency performance. After examining trends on Career Executive Service positions and approval ratings of selected government agencies in a particular period, Monsod concluded that ‘incentives, both monetary and non-monetary, have affected the quality of the bureaucracy in the Philippines’. He further says that demoralization and deterioration of the quality of the public sector’s human resource is greatly dependent on monetary and non-monetary disincentives. Monsod sees the need to strengthen enforcement on personnel hiring to avoid ineligible and political appointments, to reform monetary incentives, and to strengthen policies on transparency, especially on entitlements of higher officials.

 

Now that we have the SPMS, we can complete the whole picture. We have an incentives scheme that would correspond to the results of the performance management system. Integrating pay and performance is a move toward Strategic HR. Consequently, it is also a move toward ASEAN integration.

 

In a very recent study conducted by the World Bank, researchers looked at the link between pay and performance in the Philippine civil service through the PBB. 

According to the study, perceptions on the PBB are generally favorable. There is strong support for the PBB across all departments and bureaus. Bonus levels are considered to be substantial components of pay. There are positive perceptions on the motives behind creating the PBB. There are positive perceptions on management practices. Note, however, that some respondents say PBB has made the pay system unfair. In addition, there were comments that the rating process is not transparent, and that there is little impact on the improvement of individual effort.

Most of the respondents regard PBB as monetarily substantial, especially for those in the higher paid categories (better and best performers in the better and best bureaus).

Respondents cite positive reasons for the creation and implementation of the PBB. Some of the reasons cited include: to set and enforce performance standards, to improve morale and motivation, and to enable public officials to better serve the citizens of the Philippines. 

Respondents have also observed a positive impact on the workforce. There is better teamwork among employees, and the management is now more diligent in setting targets. However, other respondents, especially those belonging to the lower performance categories, commented that the pay system has become unfair since the introduction of the PBB. They also perceive that the rating process is not transparent, that is why they were not able to get a higher incentive.

Based on these findings, the researchers offered some recommendations. First is to increase the amount of the PBB and make it a percentage of an employee’s base pay. Second, restructure the PBB to give greater weight to the group bonus. Third, complement the PBB with non-financial incentives, especially for managers. Lastly, researchers say that PBB should form part of a reform package that would be linked to the individual performance appraisal.

From the studies I have been discussing so far, we see a link between pay and incentives systems, performance management, and agency performance. A performance management system is necessary if we are to ensure that state workers get the right incentive, and that they are highly motivated to perform well.

The answer to this is the Strategic Performance Management System or SPMS. The SPMS concretizes the link between individual performance to organization performance. It ensures that performance goals and measurements are aligned to the national development plans, agency mandate/vision/mission and strategic priorities, and the organizational performance indicator framework.

Understand that the while the Results-Based Performance Management System or RBPMS cascaded indicators from Societal to Sectoral, down to the Organization, the SPMS provides the link between organization and individual employee performance, using the same set of indicators. The SPMS thus supports the RBPMS through the monitoring of all organizational and individual employee targets and accomplishment, and not just the targets enrolled in the RBPMS.

Now that we have the SPMS, we can complete the whole picture. We have an incentives scheme that would correspond to the results of the performance management system. Integrating pay and performance is a move toward Strategic HR.

Consequently, it is also a move toward ASEAN integration.

Global HR trends reveal that organizations are shifting to performance pay in their pay reform agenda. Researchers note that traditional HR does not really give importance to performance as basis for pay or allowance increase. Pay has also rarely been used to motivate productivity. Now, more and more organizations in Asian countries are looking at pay increase and giving of incentives as a means to boost their competitiveness in terms of employment. Singapore, in particular, reaped the benefits of shifting to a high wage economy in order to build a highly motivated workforce.

Performance bonus, just like the PBB, is one form of performance pay. As countries in the ASEAN region look into economic growth and development, Philippine HR also need to shift from traditional to strategic in order to prepare and engage the workforce in a highly competetitve environment. Human resource practitioners, therefore, cannot remain at the transactional level. Since HR is no longer merely computing salaries or accomplishing documentars as required by the CSC, HRMOs are not disengaged officers doing their own thing at the office. HR is now part of agency strategy, that is why HRMOs are now partners of management in fulfilling organizational goals. More than developing the human workforce, HRMOs also have a critical role to fulfill in organizational performance, and in the long run, the fulfillment of our societal goals.

With the SPMS, individual state workers now know their place and their direct contribution to the organization. HR now has the tool to evaluate employee performance and give basis for incentives. This integration is part of Strategic HR.

I hope that the HRMOs in our midst now see how important their role is in shifting our government to Strategic HR. As you can see, excellence in HR translates to excellence in public service. Our ultimate goal is for government services to have an impact in the lives of Filipino men and woman. Dapat ramdam ni Juan at Juana. We will be able to reach this goal by shifting to Strategic HR, and building a strong, competitive, and highly motivated workforce of lingkod bayanis.

Thank you very much and good morning!