Author: Tumagole, Keorapetse
Supervisor: Professor Pieter Steyn
Date: March 2007

The amalgamation of the fourteen disestablished local councils into one demarcated area, namely, the City of Tshwane Metropolitan Municipality (CTMM,) referred hereafter as City of Tshwane, presented many challenges to the management of human resources of ±14 000 employees and a substantial challenge in managing personnel and related expenditures. This resulted in amongst others, increased salary and benefits costs assumed to be at 32% of the annual operational budget, with an annual revenue turnover of approximately R9.3 billion. The norm is at 28% for large service institutions or government institutions.

Personnel expenditure review emphasises the need to manage labour costs as an institution and to ensure that all factors that influence personnel expenditure are regularly monitored, assessed and controlled. Although it is evident that remuneration is an issue of strategic, tactical and political importance and must

allow for conflicting interests to be managed in a manner perceived by all parties as:

• equitable in the outcomes it produces;
• effective in achieving its objectives in terms of attraction, retention and motivation of staff;
• efficient in reacting to internal and external equities;
• acknowledging and rewarding exceptional performance; and
• linking the business strategy, remuneration strategy and performance management strategy into a total reward process.

The City of Tshwane is yet to create a balanced approach, in terms of these fundamentals. The strategic remuneration process should give scope for rewarding high level performance, whilst still providing appropriate rewards and recognition for effective and reliable, core, critical and scarce skills within an institution.

Many compensation practices recognise the importance of a fair exchange in order to align employee behaviour to the needs of the institution. Expectancy theory argues that people behave as if they cognitively evaluate what behaviours are possible (the probability that they can complete the task) in relation to the value of the rewards offered in exchange. According to this theory, we choose behaviours that yield most satisfactory exchange.

Within these intricacies, the City of Tshwane needs to respond with a combination of retention measures that includes amongst others, dual career path, preferred compensation schemes (including salary differentiations) and aggressive performance bonus schemes, linked to the overall performance management system but not ignoring the principles of affordability, efficiency and effectiveness. The City is aware of this crisis and will hopefully respond appropriately.