Pay for Performance in the Public Sector--Benefits and (Hidden) Costs

Abstract

Current reforms in the public sector are characterized by the introduction of businesslike incentive structures, in particular the introduction of "pay for performance" schemes in public institutions. However, the public sector has some specific characteristics, which might restrict the naive adoption of pay for performance. Our article analyzes whether the impact of pay for performance on performance is bound to conditions, and if this is the case, under which conditions pay for performance has a positive or a negative effect on performance. We explore this contingency in a meta-analytic review of previous experimental studies on the effects of pay for performance on performance. We further show why pay for performance sometimes negatively affects personal efforts. With an experimental vignette study we demonstrate (a) that motivation is likely to be a key influence on the effect of performance-related pay on performance, and (b) that pay for performance is generally more costly as it appears because it almost always produces hidden costs of rewards. Our findings help to explain the modest success of pay for performance in the public sector.

The Big Question for Performance Management: Why Do Managers Use Performance Information?

“…Therefore, even among those who perceive high reward expectations among a sample that appears to experience reasonable variation in rewards, we do not see significantly greater use of performance information. findings on PSM, and extrinsic reward, and performance information use may be quite different in contexts where extrinsic motivators are high powered and/or where managers feel that performance systems are being used to undermine the altruistic goals that motivate their behavior (Dias and Maynard-Moody 2007;Weibel, Rost, and Osterloh 2009). It may also be the case that for our sample, there is a relatively weak link between the type of effort managers believe will be rewarded and what is measured by performance systems.…”

Economic and social leader–member exchange relationships and follower performance

“…But, to the extent that work and contextual performance that exceeds expectations is tangibly rewarded, this line of reasoning should imply a positive relationship between ELMX and performance. In a r elated vein, meta-analytical findings from the pay-for-performance literature suggest that the instrumental performance-outcome relationship successfully influences performance quantity (Jenkins, Gupta, Mitra, & Shaw, 1998) and strongly increases performance for non-interesting tasks (Weibel, Rost, & Osterloh, 2010).…”

Farmácia Hospitalar e o Modelo de Gestão Dos Hospitais Públicos: Uma Análise Comparativa entre Administração Pública Direta e Organização Social de Saúde

“…Mas que, para alguns autores, as dimensões motivacionais extrínsecas ao trabalhador, como altos salários, são menos importantes para servidores públicos em comparação aos profissionais do setor privado, sendo os agentes públicos motivados por fatores intrínsecos como: altruísmo, lealdade, senso de dever, de autonomia e responsabilidade (Bowman, 2010;Houston, 2000;Perry & Hondeghem, 2008;Weibel, Rost & Osterloh, 2010).…”