Nigro, L., Nigro, F., and Kellough, J. (2014). The new public personnel administration. 7th. Independence, Kentucky. Cengage. 

Sifunda-Evelia, M. (2017). Human resource management practices: A biblical perspective. Singapore: Partridge. 

Laura Hesse 

MondayMar 28 at 10:21pm

Manage Discussion Entry

Should pay be tied to performance in the public sector? Why/Why not?

           Calls for pay being tied to performance have become increasingly popular because public demands for more demands for more bureaucratic accountability and productivity have been increasing (Nigro & Kellough, 2014 ). 90% of all U.S. companies reported that they connected  at least a portion of their employees’ pay to measures of individual/ organizational performance, or some combination of the two (Cohen, 2006). Most of them were typically in the form of a bonus (Bloom & Milkovich, 1998; Milkovich et al., 2013). Organizations seeking to maximize productivity on behalf of their shareholders seek both to hire the most highly skilled employees and to motivate those employees to maximize their output. The problems arise  when the objectives of employees do not  align well with the organization (e.g., Coase, 1937; Jensen & Meckling, 1976; Lawler, 1971; Williamson, 1975). Pay being tied to performance helps encourage employees to set goals that establish an organizations value.  A study by Cadsby, Song, & Tapon  (2007) demonstrated that pay for performance has two advantages , it attracts higher-quality employees and it motivates employees to exert more effort . The study revealed that those who changed from fixed salary to pay for performance were more productive in the assigned rounds than those who stayed in fixed salary and those who changed from pay for performance to fixed salary were less productive in the assigned rounds than those who stayed in pay for performance (Cadsby, Song & Tapon. 2007).

           It is not a bad idea to tie pay to performance in the public sector, but a few things should be considered before doing so.  How will pay for performance affect team work? If employees are working toward objectives based on individual goals, they might focus less on their team/ fellow employees. It could also leave room for being based on/ influenced by personal feelings/ opinions. Streib and Lloyd (1993) also state that problems with pay for performance are lack of adequate funding, failure to discriminate among levels of performance, perceived inequities in performance awards, conflict between raters/ those being evaluated, lack of employee confidence in the program, excessive demands on supervisor’s time, employee suspicion/ distrust of managers motives, programs failure to meet expectations, resistance from unions, and lack of compliance with program requirements. All of these things must be considered and guidelines/policies must be implemented to prevent these types of behaviors.

What are the characteristics of an effective pay for performance program? 

      In order for the pay for performance model to be effective, employees most value the pay/ recognition that is being offered, understand what is required of them to receive it, believe that the desired level of performance can be achieved, and that they organization will actually follow through with their promise. The requirements of this model must consist of a culture that supports pay for performance, effective/fair supervisors, a rigorous performance evaluation system, adequate funding, a system of checks and balances to ensure fairness, appropriate training for supervisors/employees, and ongoing system evaluation (Annual Report – U.S. Merit Systems Protection Board. 1979).  Training increases a person’s knowledge, while ensuring that they feel comfortable when trying something new. “And Jesus increased in wisdom and in stature and in favor with God and man”- Luke 2:52.

     The characteristics of an effective pay performance program are employees set goals that established company values, their motivation/ morale is boosted, productivity increased, offered employees more incentive because it gave them more control/ flexibility within the organization, top talent was attracted/ people stayed at the organization, need for manager oversight was reduced, and provided  transparency on what was expected to receive raises. If the organization does well, so does its  employees. Based on the organization’s performance rewards/ compensation are usually pre-determined (Sifuna-Evelia, 2017).  “Now to him that worketh is the reward not reckoned of grace, but of dept”- The book of Romans 4:4.

Which characteristics are most important to the program’s success and why?

      The characteristics that is most important to the program’s success is that it boosts motivation and morale. When motivation and morale is boosted people tend to want to work for/ stay at a company. An organization retains/ attracts the best employees  and increases productivity.  Morale effects attitude, satisfaction, and overall outlook in their role at an organization.  Employees with higher job satisfaction are statistically more motivated at work .

      To implement/ link pay to performance a lot should be considered a head of time. Rules (policies and procedures) must be put into place first and guidelines established. As stated by Nigro and Kellough (2014)  advantages attributed to pay for performance are that it improves attractiveness to highly qualified college graduates, increases probability that superior performers would be values/ compensated, focuses attention to the importance of performance appraisals using measurable standards/ objectives, provides managers with an effective means of providing poor performers to improve, encourages communication of goals/ expectations, and enhances organizations capacity to allocate limited financial resources in an effective manner.

References: 

Annual Report – U.S. Merit Systems Protection Board. (1979). United States: U.S. Merit Systems Protection Board.

Belogolovsky, e., & Bamberger, p. a. (2014). signaling in secret: pay for performance and the incentive and sorting effects of pay secrecy. The Academy of Management Journal, 57(6), 1706–1733. http://www.jstor.org/stable/43589327

Bloom, M., & Milkovich, G. T. (1998). Relationships among risk, incentive pay, and organizational performance. Academy of Management Journal, 41: 283-297.

Cadsby, C. B., Song, F., & Tapon, F. (2007). Sorting and Incentive Effects of Pay for Performance: An Experimental Investigation. The Academy of Management Journal, 50(2), 387–405. https://doi.org/10.2307/20159860

Coase, R. 1937. The nature of the firm. Econimica, 4: 386-405.

Cohen, K. (2006). The pulse of the profession: 2006-07 salary budget survey. Workspan, September: 23- 26.

Jensen, M. C, & Meckling, W. H. 1976. Theory of the firm: Managerial behavior, agency costs and owner ship structure. Journal of Financial Economics, 3: 305-360.

Milkovich, G. T., Newman, J. M., & Gerhart, B. (2013). Compensation (11th ed.). New York: McGraw-Hill Irwin.

Nigro, L. G & Kellough, J. E. (2014). The New Public Personnel Administration (7th Edition). Wadworth Cengage Learning US.

Perry, J. L., Engbers, T. A., & Jun, S. Y. (2009). Back to the future? Performance-related pay, empirical research, and the perils of persistence. Public Administration Review, 69: 39-51.

Streib, G., & Nigro, L. G. (1993). Pay for Performance in Local Governments: Programmatic Differences and Perceived Utility. Public Productivity & Management Review, 17(2), 145–159. https://doi.org/10.2307/3380510

Sifuna-Evelia, M. (2017). Human Resource Management Practices a Biblical Perspective.

Partridge Publishing. ISBN: 9781543742282

Williamson, O. E. (1975). Markets and hierarchies: Analysis and antitrust implications. New York: Free Press.