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4.6.1 Allocate bonus pool based on actual results in the past year. The total

pool of bonuses available for distribution within RTHKC is fixed at roughly 10 to 15 percent times the gross compensation of eligible staff in Grades 5 through 8. This pool should be allocated among the divisions, and in turn among the units, based on their overall performance, and then to individuals within each unit.

4.6.2 Thus, in order for a unit head to reward one person with an above-average bonus, someone else must receive a below-average bonus. Fixing the pool available to each unit ensures an even distribution from poor to outstanding evaluations and prevents attempts to skew performance and rewards unfairly. As noted earlier, the bonus levels shown in

Exhibit 8 represent the expected proportions for average performers; superior or inferior performers may get 5 to 10 percentage points above or below the averages, respectively.

4.7.1 Award real increments based on performance. Increments, like bonuses,

should be based on merit. However, while bonuses should reward tangible results in the

past year, increments should aim to reflect improved skill levels as evidenced by recent

performance. Achievements of a one-off or unique nature that are not expected to

strengthen skills long term should therefore be rewarded with bonuses, not increments. For example, a TV Executive Producer who has supervised the production of some extraordinary programmes in the past year yet has not demonstrated systematic improvements in managerial skills may be rewarded with a substantial bonus but not necessarily a real increase.

4.7.2 Unlike bonuses, real increments should not be distributed from a fixed pool but should depend on actual skills acquired. Deciding increments is a bottom-up process, in which each manager needs to evaluate his or her subordinates' current skill level, with scrutiny from the top to prevent indiscriminate increases. In any case, the total real increment should not exceed 3 percent of RTHKC's total compensation budget per annum, as in the civil service and other statutory organisations, unless the Board of Governors can

marshal evidence to support extraordinary skill improvements over the past year.

5.1

5- LINK COMPENSATION ADJUSTMENTS TO BUDGET PROJECTIONS

Given that RTHKC will operate with greater flexibility as a subvented organisation (with less detailed scrutiny from the Recreation and Culture Branch and the Finance

McKinsey & Company, Inc.

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