Why Does Performance Pay De-Motivate: Financial Incentives versus Perfrormance Appraisal

Stephen French, Katsuyuki Kubo and David Marsden

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: The sheer scale and speed of the shift of payment system from time-based salaries to performance-related pay, PRP, in the British public services provides a unique opportunity to test the effects of incentive pay schemes. This study is based on the first large scale survey designed to measure the effects of performance related pay on employee motivation and work behaviour across the British public services. While there is evidence of a clear incentive effect for those gaining above average PRP, it is likely that it is offset by a more widespread demotivating effect arising from difficulties of measuring performance fairly. Organisational commitment appears to offset some of the negative effects of PRP.

Keywords: Performance related pay; incentives; performance measurement; organisational commitment; public sector (search for similar items in EconPapers)
Date: 2000-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: Why does performance pay de-motivate: financial incentives versus performance appraisal (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp0476

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