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Why Does Performance Pay De-Motivate: Financial Incentives versus Perfrormance Appraisal

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Author Info
D Marsden
S French
K Kubo

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Abstract

The sheer scale and speed of the shift of payment system from time-based salaries to performance-related pay, PRP, in the British public services provides a unique opportunity to test the effects of incentive pay schemes. This study is based on the first large scale survey designed to measure the effects of performance related pay on employee motivation and work behaviour across the British public services. While there is evidence of a clear incentive effect for those gaining above average PRP, it is likely that it is offset by a more widespread demotivating effect arising from difficulties of measuring performance fairly. Organisational commitment appears to offset some of the negative effects of PRP.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number 0476.

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Date of creation: Nov 2000
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Handle: RePEc:cep:cepdps:0476

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Keywords: Performance related pay incentives performance measurement organisational commitment public sector

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Burgess, Simon & Turon, Hélène, 2000. "Unemployment Dynamics, Duration and Equilibrium: Evidence from Britain," CEPR Discussion Papers 2490, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. M Dabrowski & S Gomulka & J Rostowski, 2000. "Whence Reform? A Critique of the Stiglitz Perspective," CEP Discussion Papers 0471, Centre for Economic Performance, LSE. [Downloadable!]
  3. H Lehmann & J Wadsworth, 2000. "Tenures that Shook the World: Worker Turnover in Russia, Poland and Britain," CEP Discussion Papers 0459, Centre for Economic Performance, LSE. [Downloadable!]
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  4. Richard Portes & Helene Rey, 1999. "The Determinants of Cross-Border Equity Flows," NBER Working Papers 7336, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Buiter, Willem H, 2000. "Optimal Currency Areas: Why Does The Exchange Rate Regime Matter?," CEPR Discussion Papers 2366, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Martin, Philippe & Rey, Hélène, 1999. "Financial Super-Markets: Size Matters for Asset Trade," CEPR Discussion Papers 2232, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. W. H. Buiter, 2000. "Monetary Misconceptions," CEP Discussion Papers 0469, Centre for Economic Performance, LSE. [Downloadable!]
  8. Manning, Alan, 2001. "Labour supply, search and taxes," Journal of Public Economics, Elsevier, vol. 80(3), pages 409-434, June. [Downloadable!] (restricted)
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  9. Martin, Philippe & Rey, H., 2000. "Financial integration and asset returns," European Economic Review, Elsevier, vol. 44(7), pages 1327-1350, June. [Downloadable!] (restricted)
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  10. S Nickell & L Nunziata, 2000. "Employment Patterns in OECD Countries," CEP Discussion Papers 0448, Centre for Economic Performance, LSE. [Downloadable!]
  11. B Bell & S Nickell & G Quintini, 2000. "Wage Equations, Wage Curves and All That," CEP Discussion Papers 0472, Centre for Economic Performance, LSE. [Downloadable!]
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  12. Rachel Griffith & Stephen Redding & John Van Reenen, 2000. "Mapping the two faces of R&D: productivity growth in a panel of OECD industries," IFS Working Papers W00/02, Institute for Fiscal Studies. [Downloadable!]
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  13. P. B. Kenen, 2000. "Currency Areas, Policy Domains, and the Institutionalization of Fixed Exchange Rates," CEP Discussion Papers 0467, Centre for Economic Performance, LSE. [Downloadable!]
  14. H Gospel & G Lockwood & P Willman, 2000. "The Right to Know: Disclosure of Information for Collective Bargaining and Joint Consultation," CEP Discussion Papers 0453, Centre for Economic Performance, LSE. [Downloadable!]
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  16. B Petrongolo & C A Pissarides, 2000. "Looking Into the Black Box: A Survey of the Matching Function," CEP Discussion Papers 0470, Centre for Economic Performance, LSE. [Downloadable!]
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Alan Manning, 2001. "A Generalised Model of Monopsony," CEP Discussion Papers 0499, Centre for Economic Performance, LSE. [Downloadable!]
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  2. C Dougherty, 2000. "Numeracy, Literacy and Earnings: Evidence from the National Longitudinal Survey of Youth," CEP Discussion Papers 0478, Centre for Economic Performance, LSE. [Downloadable!]
  3. H G Overman, 2000. "Neighbourhood Effects in Small Neighbourhoods," CEP Discussion Papers 0481, Centre for Economic Performance, LSE. [Downloadable!]
  4. S Gomulka, 2000. "Pension Problems and Reforms in the Czech Republic, Hungary, Poland and Romania," CEP Discussion Papers 0480, Centre for Economic Performance, LSE. [Downloadable!]
  5. Stephen Nickell & Glenda Quintini, 2001. "Nominal Wage Rigidity and the Rate of Inflation," CEP Discussion Papers 0489, Centre for Economic Performance, LSE. [Downloadable!]
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  6. S Nickell & T Jones & G Quintini, 2000. "A Picture of Job Insecurity Facing British Men," CEP Discussion Papers 0479, Centre for Economic Performance, LSE. [Downloadable!]
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  7. David Marsden, 2004. "Unions and Procedural Justice: An Alternative to the Common Rule," CEP Discussion Papers dp0613, Centre for Economic Performance, LSE. [Downloadable!]
  8. G Duranton & V Monastiriotis, 2000. "Mind the Gaps: the Evolution of Regional Inequalities in the UK, 1982-1997," CEP Discussion Papers 0485, Centre for Economic Performance, LSE. [Downloadable!]
  9. Adriana Di Liberto & James Symons, 2001. "Education and Italian Regional Development," CEP Discussion Papers 0496, Centre for Economic Performance, LSE. [Downloadable!]
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