Performance-related pay (PRP) refers to “the variable part of pay which is awarded each year (or on any other periodic basis) depending on performance” (OECD, 2005, pag. 20). The underlying assumption in the implementation... [ view full abstract ]
Performance-related pay (PRP) refers to “the variable part of pay which is awarded each year (or on any other periodic basis) depending on performance” (OECD, 2005, pag. 20). The underlying assumption in the implementation of PRP systems is that they can help to increase efficiency and employee motivation in public sector organizations (Weibel et al., 2010; Osborne & Gaebler, 1992). However, the existence of a causal link between the adoption of a PRPS, increased performance and individual motivation is currently under scrutiny and widely debated (Perry et al., 2009). According to the “crowding out effect”, a task may sometimes provide its own utility for the doers (intrinsic motivation) and such a human feature may affect performance so strongly that additional money may not be required to reward results (Ryan & Deci, 2000).
In this vein, the research aims to investigate the effect of different performance-related incentives on individual performance and motivation on a sample of Italian managers of three different settings: Regional Governments, Municipalities and Health-care, as they were all affected by a common legislation on performance management systems and tried to foster a renewed set of rewarding tools.
The research uses a quantitative approach through a questionnaire completed by 916 managers (568 working for Regions, 244 for Municipalities and 104 for the Health-care sector - which account for about 15% of managers in each of the three settings).
The results shows some similarities and differences in the way PRPS are perceived and used in the three above cited settings. In all settings we found a significant difference with the extant literature, which holds that there is a very limited differentiation in the distribution of monetary rewards in the Italian Public Sector. We found that this differentiation and that the distribution of monetary rewards exist in all the three settings and is significant. Also individuals are more intrinsically motivated than extrinsically and all managers are confident about their ability to meet the required working standards even if they received different forms of incentives after the evaluation. Differences mainly refer to specific type of reward used, which is “money” and “involvement in the definition of objectives for the following year” in the sample of managers working for Regions and Municipalities while managers working for the Health-care sector also received “verbal recognition for the work done”.
Practical implications and research future perspectives are also discussed.
OECD (2005). Performance-related pay policies for government employees, Paris: OECD Publishing.
Osborne, D. & Gaebler, T. (1992). Reinventing Government. Reading MA: Addison-Wesley.
Perry, J. L. Engbers, T. A. & Yun Jun, S. (2009). Back to the Future? Performance-Related Pay, Empirical research, and the Perils of Persistence. Public Administration Review, 69(1), 39-51.
Ryan, R.M. & Deci, E. L. (2000). Self-determination theory and the facilitation of intrinsic motivation, social development, and well-being. American Psychologist, 55(1), 68-78.
Weibel, A. Rost, K. & Osterloh, M. (2010). Pay for Performance in the Public Sector-Benefits and (Hidden) Costs. Journal of Public Administration Research and Theory, 20(2), 387-412.
