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Dynamics of Performance Measurement Systems

Author

Listed:
  • Gerald Marschke
  • Pascal Courty

Abstract

We present a model of how organizations manage performance measures when gaming is revealed over time. The incentive designer does not know when it selects a performance measure whether it will communicate the right behavior. Only over time does the principal find out the agent's responses and then uses this additional information to update and finetune the incentive system. Using data from a government organization, we test the model's main prediction that the correlation between the performance measure and the true goal of the organization should change after the performance measure is included in the incentive system and we find some evidence consistent with this hypothesis.

Suggested Citation

  • Gerald Marschke & Pascal Courty, 2002. "Dynamics of Performance Measurement Systems," Discussion Papers 02-09, University at Albany, SUNY, Department of Economics.
    • Handle: RePEc:nya:albaec:02-09
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    Citations

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    Cited by:

    1. Carolyn J. Heinrich & Gerald Marschke, 2010. "Incentives and their dynamics in public sector performance management systems," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 29(1), pages 183-208.
    2. Finn Christensen & James Manley & Louise Laurence, 2010. "The Allocation of Merit Pay in Academia," Working Papers 2010-13, Towson University, Department of Economics, revised Jul 2010.
    3. Courty, Pascal & Marschke, Gerald, 2004. "A General Test of Gaming," CEPR Discussion Papers 4514, C.E.P.R. Discussion Papers.
    4. Kato, Takao & Kauhanen, Antti & Salmi, Julia, 2013. "Empirical Evidence on the Dynamics of Incentive Plans," ETLA Working Papers 20, The Research Institute of the Finnish Economy.
    5. Schmid, Günther, 2004. "Gewährleistungsstaat und Arbeitsmarkt: Neue Formen von Governance in der Arbeitsmarktpolitik," Discussion Papers, Research Unit: Labor Market Policy and Employment SP I 2004-107, WZB Berlin Social Science Center.
    6. Pascal Courty & Gerald Marschke, 2003. "Making Government Accountable: Lessons from a Federal Job Training Program," The Centre for Market and Public Organisation 03/083, The Centre for Market and Public Organisation, University of Bristol, UK.
    7. Hasnain, Zahid & Manning, Nick & Pierskalla Henryk, 2012. "Performance-related pay in the public sector : a review of theory and evidence," Policy Research Working Paper Series 6043, The World Bank.
    8. Bruttel, Oliver, 2005. "Contracting-out and governance mechanisms in the public employment service," Discussion Papers, Research Unit: Labor Market Policy and Employment SP I 2005-109, WZB Berlin Social Science Center.
    9. Finn Christensen & James Manley & Louise Laurence, 2011. "The Allocation of Merit Pay in Academia: A Case Study," Economics Bulletin, AccessEcon, vol. 31(2), pages 1548-1562.
    10. Kuhn, Michael & Siciliani, Luigi, 2013. "Manipulation and auditing of public sector contracts," European Journal of Political Economy, Elsevier, vol. 32(C), pages 251-267.
    11. Gibbs, Michael, 2021. "Job Design, Learning & Intrinsic Motivation," IZA Discussion Papers 14285, Institute of Labor Economics (IZA).
    12. Hubley, Teresa, 2008. "Lessons from a project to create performance measures for public health," Evaluation and Program Planning, Elsevier, vol. 31(4), pages 410-415, November.
    13. Peter Friedrich & Joanna Gwiazda & Chang Woon Nam, 2003. "Development of Local Public Finance in Europe," CESifo Working Paper Series 1107, CESifo.
    14. Siebert, W. Stanley & Zubanov, Nick, 2008. "Management Economics in a Large Retail Organization," IZA Discussion Papers 3645, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    Performance Incentives; Performance Measurement; Gaming; Multitasking; Government Organization;
    All these keywords.

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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