Pay-for-Performance (Federal Government)
Pay-for-Performance is a method of employee motivation meant to improve performance in the United States federal government by offering incentives such as salary increases, bonuses, and benefits.
According to recent studies, however, there are key differences in how pay-for-performance models influence federal employees in public service roles.
His research reveals that public servants tend to be more intrinsically motivated, and thus, are prone to have a negative reaction to monetary incentives.
As consultants, academic experts, and employee advocate groups analyzed merit pay systems' success in private businesses, they recommended expanding this method into the public sector.
In 1978 U.S. President Jimmy Carter introduced the broad outlines of the Civil Service Reform Act in his State of the Union message.
[3] This merit pay system was a break in the long tradition of automatic salary increases based on length of service.
When Ronald Reagan was elected in 1982, he significantly reduced the size and cost of many portions of government, thereby greatly limiting the Civil Service Reform Act.
A limited and restricted budget is one of the biggest factors that have prevented the public sector from successfully implementing a pay for performance program.
Deci goes even further to show that when extrinsic rewards are placed on these activities, it is detrimental to performance because it puts a market price on something they already value internally.
His results reported that "perceived competence partially mediated the positive relationship found between performance-contingent reward and intrinsic motivation.
"[13] In other words, the detrimental effects of providing tangible rewards, discussed in the Deci studies, occurred under highly restricted, easily avoidable conditions.
Giving employees a performance-contingent monetary incentive to do something they already enjoy can decrease his/her motivation to do it as the person is then likely to view its action as externally driven rather than as internally appealing.
The authors’ hypothesis was that the public sector has specific characteristics (the same as those diagnosed by Deci and Perry) that would make pay for performance ineffective, calling the proposed adoption for such policies "naïve".
[15] Research has continued to support the notion that although incentive systems may be effective and efficient in one organizational context, they can be ineffective or even counterproductive in others.
He cites an MIT study in which the research team repeatedly demonstrated that as long as the tasks being undertaken are purely mechanical, performance-related pay works to improve results.
Instead of cash bonuses or raises, employees may instead be given discretionary time to work on creative projects in which they have a personal interest, as has been implemented by companies such as Google and 3M.
