The Paradox of Performance Related Pay Systems: 'Why Do We Keep Adopting Them in the Face of Evidence that they Fail to Motivate?'
AbstractThis paper considers one of the paradoxes of incentive pay used in Britain's public services, namely that despite much evidence that it does not motivate employees, it continues to be widely used. It is argued that behind this evidence, there are significant examples in which its use has been associated with improved performance. A good part of this is to be explained by the way performance pay links pay and appraisal, and the pressure this puts on line managers to set clearer goals for their staff. There is also some evidence that the goal setting is the outcome of a form of integrative, or positive sum, negotiation between individual employees and their managers, and that it is not just 'top down'.
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Bibliographic InfoPaper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0946.
Date of creation: Aug 2009
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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP
pay for performance; public sector pay;
Other versions of this item:
- Marsden, David, 2010. "The paradox of performance-related pay systems: why do we keep adopting them in the face of evidence that they fail to motivate?," Open Access publications from London School of Economics and Political Science http://eprints.lse.ac.uk/, London School of Economics and Political Science.
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-05 (All new papers)
- NEP-CBE-2009-09-05 (Cognitive & Behavioural Economics)
- NEP-LAB-2009-09-05 (Labour Economics)
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.:
- Marsden, David & Belfield, Richard, 2006.
"Pay for performance where output is hard to measure : the case of performance pay for school teachers,"
Open Access publications from London School of Economics and Political Science
http://eprints.lse.ac.uk/, London School of Economics and Political Science.
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