'Good' and 'bad' control in public administration: How differing implementations of performance appraisal and reward systems impact cooperative climate and employee trust in the employer

In the course of the new pubic management (NPM) reform, public administrations increasingly introduce performance appraisal and reward systems (PARS). However, the application of such private sector inspired... [ view full abstract ]

In the course of the new pubic management (NPM) reform, public administrations increasingly introduce performance appraisal and reward systems (PARS). However, the application of such private sector inspired performance-oriented Human Resource Management (HRM) instruments is a highly contested issue. They are often seen to signal employer’s distrust, which in turn has devastating effects on employees’ public service motivation and trust in their employer.
Drawing on social exchange, fairness heuristic and expectancy theory, we provide evidence that only ‘poorly implemented’ PARS, that are those applying unfair, non-transparent, and non-reliable mechanisms, jeopardize employees’ trust in their employing public sector organization. In contrast, just, transparent and reliable systems have positive effects on employee trust. In addition, we find the relationship between different implementations of PARS to be mediated by cooperative climate. This process unfolds, because the appliance of fairness, transparency and reliability reflected in organizational procedures translates to employees’ dealing with other organizational members. The outcome of this is a more or less cooperative climate, which, in turn, affects employees’ perception of their organization’s trustworthiness.
Drawing on survey data from 184 staff members from German municipalities, we examined the impact of two different PARS implementations on trust via cooperative climate by structural equation modelling. The findings confirmed the hypothesized mediation model.