Factors Affecting the Size of Performance Awards among Mid-L

By Wise, Lois Recascino | Public Administration Quarterly, Fall 1994 | Go to article overview

Factors Affecting the Size of Performance Awards among Mid-L


Wise, Lois Recascino, Public Administration Quarterly


INTRODUCTION

Broad global changes are underway in the policies affecting public sector pay systems. During the 1980s, concerns for maintaining market parity (Crenshaw, 1990; Wise, 1988; van der Hoek, 1989; Elliot and Murphy, 1987) and promoting social equality (Rosenbloom, 1984) through public sector pay policies began to lose ground to demands for greater efficiency and cost effectiveness in government operations. Within this context, attention is focused on the reward structure of public sector pay systems and, more specifically, on building a "culture of performance" (National Commission on the Public Service, 1988) in public agencies. The trend toward more individualized and performance-oriented pay has realigned the factors affecting public sector pay administration.

Although the American experience with pay-for-performance has been relatively limited, it has generated considerable interest abroad. Performance-contingent pay is one of several instruments that have been introduced or are under consideration to make pay rates more individualized in national, state, and local civil service systems (Crenshaw, 1990). In addition to performance-contingent rewards, civil service systems have implemented market supplements, skill supplements, training premiums, and similar bonuses for workers in occupations with a high rate of attrition or which are highly valued in government (Sjolund, 1989; van der Hoek, 1989). These new instruments of pay administration have the common effect of shifting public sector pay policies away from limiting managerial discretion and emphasizing the legal rights of public servants. In this sense, these new instruments represent important changes in the value systems operating within the public bureaucracy (Sjolund, 1989).

Despite a lack of evidence to support its worth (Pearce, 1989; Perry, 1986; Pearce and Perry, 1983; GAO, 1984), pay-for-performance now appears to be well entrenched in civil service systems around the world (Ingraham and Peters, 1988; OECD, 1988). Two factors appear to account for the widespread popularity of performance-based pay in government. One is the almost universal demand for greater efficiency in government operations. The underlying assumption, which is questioned by many, is that making individual pay contingent upon performance will increase individual productivity and, in turn, the additive effects of each member's performance will improve the efficiency of operations overall (Perry, 1986; Buchanan, 1981).

Recent research suggests that much of the logic underlying the establishment of pay-for-performance systems among federal managers is not supported by empirical evidence although significant relationships do exist among certain key structural elements such as the accuracy of the appraisal system and employees' opinions about performance awards and individual competence, program performance, and agency performance (Perry and Miller, 1991).

Performance-contingent pay puts an emphasis on valued individual behaviors and attributes and away from other areas of reward such as experience and seniority. In the United States, calls to restore motivation and improve performance were at the root of the Merit Pay System (MPS) and its successor, the Performance Management Recognition System (PMRS), for middle managers in the U.S. Civil Service System (Perry, 1988-1989).

A second motive for the transition to performance-based pay is an attempt to make the public sector more competitive with those in the private sector in recruiting and retaining skilled workers. The belief here is that by offering more flexibility to reward high performers in government, the public sector will have more success in maintaining a high quality work force. The transition represents an effort by some governments to maintain their market posture as a competitive employer in a period when public sector pay rates have slipped below the levels offered for similar work in the private sector. …

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