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

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Author Info

  • Stephen French
  • Katsuyuki Kubo
  • David Marsden

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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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0476.

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Date of creation: Nov 2000
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Handle: RePEc:cep:cepdps:dp0476

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

Related research

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

References

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  1. Stephen Nickell & Luca Nunziata, 2000. "Employment Patterns in OECD Countries," CEP Discussion Papers dp0448, Centre for Economic Performance, LSE.
  2. Burgess, Simon & Turon, Hélène, 2000. "Unemployment Dynamics, Duration and Equilibrium: Evidence from Britain," CEPR Discussion Papers 2490, C.E.P.R. Discussion Papers.
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Cited by:
  1. Steinar Holden, 2012. "Implications of insights from behavioral economics for macroeconomic models," IMK Working Paper 99-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  2. Driscoll, John C. & Holden, Steinar, 2014. "Behavioral Economics and Macroeconomic Models," Finance and Economics Discussion Series 2014-43, Board of Governors of the Federal Reserve System (U.S.).
  3. David Marsden, 2004. "Unions and Procedural Justice: An Alternative to the Common Rule," CEP Discussion Papers dp0613, Centre for Economic Performance, LSE.

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