Some years ago, the director of the Covadonga hospital decided to distribute funds to improve performance. The fund was for the whole hospital but was shared out among the three divisions—doctors (28 per cent), nurses, and administration and general services. The 28 per cent for doctors were divided among all of them, giving a standard bonus per doctor of 140,000 ptas. per year ( this was the bonus amount before taxes) . Each department or unit was given a total amount equal to the standard payment multiplied by the number of doctors attached to it.
Evaluation of each department. The bonuses could have been reduced up to 35 per cent by the Medical Manager after evaluating each department performance comparing four quality and quantity criteria with each department objectives set in advance. In fact, these discounts were applied only to 15 per cent of the departments.
Evaluation of doctors and heads of department. The funds were paid out in the form of two half-yearly bonuses. Doctors were divided in three levels,
A,
B and
C (
C being the highest), and the compensation difference between each two levels was about 20 per cent. The heads of departments were graded according to 15 criteria and they in turn classified the other doctors. Most of the heads of departments put all their doctors at level
C and the supervisors—at level
B. In order to evaluate the doctors, the
ABC scale was used giving them 1, 1.2 or 1.4 points, depending on whether their performance was considered normal, good or very good. This grade was multiplied by a factor for responsibility, giving them 1, 1.11 or 1.28 points depending on whether the doctor in question was an assistant, a head of section or a head of department, respectively.
Table. Calculation of annual individual bonuses
| Category | [1]
points | [2]
Evaluation | [3]
point | [4]
[1]X[3] | [5]
[4]x(98,800 ptas.) |
| Head of department | 1.28 | C | 1.40 | 1.792 | 177,050 |
| Head of section | 1.11 | A | 1.00 | 1.110 | 109,668 |
| Assistant | 1.00 | C | 1.40 | 1.400 | 138,320 |
| Assistant | 1.00 | C | 1.40 | 1.400 | 138,320 |
| Assistant | 1.00 | C | 1.40 | 1.400 | 138,320 |
| Assistant | 1.00 | C | 1.40 | 1.400 | 138,320 |
| Total |
|
|
| 8.502 | 840,000 |
The Table shows by way of illustration how the bonuses were calculated for the six doctors in a department for whom there was no deduction. The total fund for the department (840,000 ptas., that is, 140,000 ptas. for 6 doctors) was divided by 8.502 (the result of multiplying the points in column [1] for each category by the individual evaluations in column [3] to give the basic bonus—in this case 98,800 ptas.) In column [5] the individual bonuses are calculated, multiplying the basic bonus by the total points obtained by each doctor. In other words, the 840,000 ptas. are shared out in proportion to the points obtained by each doctor. The sums of the individual bonuses and the total for each department were announced publicly to all the staff. When the system was applied, compensation for these professionals ranged between four and six million pesetas.
a) Analyze the system, paying special attention to factors such as the quantitative and qualitative importance of these bonuses and the possible reactions of middle-level staff.
b) Propose a plan of action to improve the system.