Better pay can only come from better performance

Nov 23, 2003 Management, Sunday Nation

We are in the grip of a peculiar madness. The whole of this year has been marked by agitation for more pay. In sector after sector, strikes and even riots have been witnessed, with the strident call ringing out across the land: ‘pay us more!’ No sector is immune. Whether you are a teacher, a lecturer, a doctor, a nurse, a councillor, a banker, a lawyer or a labourer: you feel hard done by. You are the victim of an historical injustice. You have suffered for too long. Other people have eaten, and you have not. It’s time for action. You must get more!

Why now, and not last year? What is different in 2003 compared to 2002? Same economy, same GDP, similar inflation levels – so what changed? Just the government. The Narc government came in on a tidal wave of popular support and unprecedented euphoria. But it did not exercise restraint. Prudence was not a word that came easily to its lips. By feeding the hype and raising expectations, the government opened up Pandora’s box. And now the buzz is drowning out all other sounds in the economy.

Time for a reality check. We are still a fourth-division economy. Less than 2 per cent of our economically active population has attended university. More than half our people do not have access to clean water. The value of our currency is inextricably linked to the largesse of donors. Whichever way you look at it, we are a poor country. So where did we get the idea that we can sustain world-class pay levels in each and every sector?

If everyone suddenly gets paid more, several things will happen. One, we will encounter severe wage-push inflation. The level of general prices will rise, and any real-income gains obtained by workers will soon be whittled away. Two, employers will soon discover that they cannot sustain their new payrolls, and will announce job-cuts. Three, the government will spend an even higher proportion of its revenues on salaries and wages. Its grand plans for roads, research institutions and better security – all good things for future growth – will be shelved again. We will consume what we have, rather than invest it. Four, investors will rewrite their business plans to include higher wage levels and input prices, and will discover that a major investment in this country may not be so attractive after all.

If we cannot see this, then we are losing sight of some common-sense principles. Money for higher pay does not come out of some bottomless pit. The Treasury is not a huge feeding trough for all-comers to stick their snouts into. Donors cannot sustain our demands for a high standard of living – it’s not their responsibility. In short, we seem to forget that there are limits in the economy.

There is, at any particular time, a limit to the living standards that an economy can provide to its workers. In other words, there is a ‘feasible’ real wage. If workers try to get more than this, accelerating wages will bring higher prices in their train. The dawn of higher incomes will be short-lived, followed by the dusk of higher prices for everything.

In fact, common sense has given way to a disease called ‘benchmarking’. Everyone wants to compare his or her remuneration to that of everyone else. Lecturers compare their pay to lawyers, and feel aggrieved. Doctors in the public sector look at those in private sector, and feel enraged. Engineers in Kenya look at those in Europe, and feel undervalued. A managing director of one company looks at what he thinks his peers earn elsewhere, and writhes in self-righteous agony.

This disease has taken firm root in Kenya. As the Narc government now struggles with the consequences, it would do well to evaluate its own role in the matter. When our new MPs rolled into power, what was the first thing they did? Why, agitate for more pay, of course. Except that they did not need to agitate very loudly, or for very long: they had granted themselves the power to approve their own pay rises in any case. To placate the public, they trotted out the usual arguments about what a tough job MPs do, what parliamentarians are paid elsewhere, etc. Whether the public agreed or not was hardly relevant; it was done anyway.

As a country, we will pay for this single act of greed and irresponsibility for a long time to come. In the MPs’ case, it wasn’t just about the direct cost of the increment, you see; our elected representatives forgot (as they always do) their responsibility as role models in the country. Councillors, doctors, lawyers and teachers were all watching. What message did they get? Go for it! Make some spurious comparisons. Talk about the unique difficulty of your job. Highlight its crucial importance to the future of every Kenyan. And go for it! Great pay is your unquestionable right as a Kenyan.

At all levels in this country, we are forgetting the fundamental link between pay and performance. What the MPs should have done, had they been men and women of foresight, was to grant themselves a pay rise pegged to the performance of the country. As our leaders, they should have taken collective responsibility for economic growth. When we hit 5 per cent growth in GDP, say, their increment would kick in. Not a voice would have been raised in protest. But they did not do this, and the most unfortunate precedent was set: get the money first, perform later (if ever). You can see the outcome: the Speaker has just had to order the members’ bar closed during sittings in Parliament.

It is still not too late. We may be forced to give out pay rises, yes, but let us never give out another one without linking it to performance. Let every employer set performance scorecards as a matter of course. Let increments be phased in, to be activated when agreed performance targets are achieved. Let us move away from bubble-headed arguments about fairness and equity, and start to pay for results. Too many people seem to think that they somehow ‘deserve’ good pay – because other people get it, because of the number of degrees they have, because that’s what happens in rich countries, because of the rain in Spain, because, because. Let’s cut out the nonsense. Let’s focus on the things that really matter: performance, delivery and results. All else is hot air.

Perhaps even our MPs can still redeem themselves? Perhaps they can put an end to all the industrial agitation in the country by rewriting their own contracts? Perhaps they can link their pay to achievements in growth of the economy, in provision of hospital beds, in water delivery, in kilometres of roads built, etc? Perhaps they can put the country first? Perhaps you’ll forgive me for signing off abruptly, I think I see a flying pig about to crash into Parliament’s clock tower…