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The Role of Performance-Related Pay in Renegotiating the “Effort Bargain†: The Case of the British Public Service

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  • David Marsden

Abstract

Much of the academic and policy literature on performance-related pay (PRP) focuses on its role as an incentive system. Its role as a means for renegotiating performance norms has been largely neglected. This study examines the introduction of performance-related pay, based mostly on appraisals by line managers, in Britain's public services during the 1990s. Previous research indicates that PRP failed to motivate many of the staff and that its operation was divisive. Nevertheless, other information suggests that productivity rose. This article seeks to resolve the paradox using contract theory to show that performance pay was the instrument of a major renegotiation of performance norms, and that this rather than motivation was the principal dynamic. Goal-setting and appraisal by line managers played a key role in this process.

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  • David Marsden, 2004. "The Role of Performance-Related Pay in Renegotiating the “Effort Bargain†: The Case of the British Public Service," ILR Review, Cornell University, ILR School, vol. 57(3), pages 350-370, April.
    • Handle: RePEc:sae:ilrrev:v:57:y:2004:i:3:p:350-370
    DOI: 10.1177/001979390405700302
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    References listed on IDEAS

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    1. Marsden, David & Richardson, Ray, 1992. "Motivation and performance related pay in the public sector: a case study of the Inland Revenue," LSE Research Online Documents on Economics 3647, London School of Economics and Political Science, LSE Library.
    2. Marsden, David & French, Stephen, 1998. "What a performance: performance related pay in the public services," LSE Research Online Documents on Economics 4421, London School of Economics and Political Science, LSE Library.
    3. Marsden, David, 2003. "Renegotiating performance: the role of performance pay in renegotiating the effort bargain," LSE Research Online Documents on Economics 3634, London School of Economics and Political Science, LSE Library.
    4. Teulings,Coen & Hartog,Joop, 2008. "Corporatism or Competition?," Cambridge Books, Cambridge University Press, number 9780521049399.
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    Citations

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    Cited by:

    1. David Marsden, 2006. "Individual Employee Voice: Renegotiation and Performance Management in Public Services," CEP Discussion Papers dp0752, Centre for Economic Performance, LSE.
    2. Belfield, Richard & Marsden, David, 2004. "Unions, performance-related pay and procedural justice: the case of classroom teachers," LSE Research Online Documents on Economics 3632, London School of Economics and Political Science, LSE Library.
    3. Antti Kauhanen & Hannu Piekkola, 2006. "What Makes Performance-Related Pay Schemes Work? Finnish Evidence," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 10(2), pages 149-177, May.
    4. Belfield, Richard & Marsden, David, 2005. "Performance pay for teachers: linking individual and organisational level targets," LSE Research Online Documents on Economics 3631, London School of Economics and Political Science, LSE Library.
    5. David Marsden, 2015. "Teachers and Performance Pay in 2014: First Results of a Survey," CEP Discussion Papers dp1332, Centre for Economic Performance, LSE.
    6. David Marsden, 2010. "Individual Voice in Employment Relationships: A Comparison Under Different Collective Voice Regimes," CEP Discussion Papers dp1006, Centre for Economic Performance, LSE.
    7. James Arrowsmith & Paul Marginson, 2011. "Variable Pay and Collective Bargaining in British Retail Banking," British Journal of Industrial Relations, London School of Economics, vol. 49(1), pages 54-79, March.
    8. Mikhail Gershman & Tatiana Kuznetsova, 2013. "Efficient Contract in the R&D Sector: Key Parameters," Foresight and STI Governance (Foresight-Russia till No. 3/2015), National Research University Higher School of Economics, vol. 7(3), pages 26-36.
    9. Cameron Roles & Sukanya Ananth & Michael O’Donnell, 2022. "Reinforcing managerial prerogative in the Australian Public Service during the COVID-19 pandemic," The Economic and Labour Relations Review, , vol. 33(1), pages 18-36, March.
    10. Bryson, Alex & Freeman, Richard B., 2007. "Doing the right thing? does fair share capitalism improve workplace performance," LSE Research Online Documents on Economics 4964, London School of Economics and Political Science, LSE Library.
    11. Barinova, V. A. (Баринова, В.) & Eremkin, V. A. (Еремкин, В.) & Lanshina, T. A. (Ланьшина, Т.) & Pleskachev, Yuriy Andreevich (Плескачев, Юрий Андреевич), 2016. "Restrictions on the Use of Effective (Incentive) Contracts in the Public Sector and Public Service [Ограничения Применения Эффективных (Стимулирующих) Контрактов В Бюджетном Секторе И На Государств," Working Papers 964, Russian Presidential Academy of National Economy and Public Administration.
    12. Nick Manning & Zahid Hasnain & Jan Henryk Pierskalla, 2012. "Public Sector Human Resource Practices to Drive Performance," World Bank Publications - Reports 25489, The World Bank Group.

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