Can pay for performance work in government? It is done all the time in the private sector but resistance is huge when making changes to a large bureaucracy like the federal government.
Since several large federal agencies are in the process of trying to implement some form of pay for performance, the issue is practical as well as academic.
The Merit Systems Protection Board (MSPB) considers the question in its latest newsletter, Issues of Merit.
There are several critical factors that will determine how successful pay for performance will be in agencies. The MSPB also makes several observations on pay for performance theory.
First, a sound theory and good intentions are not enough. The amount of money given to employees makes a difference. But higher pay does not always lead to improving recruitment efforts and retaining the best performing employees. It helps; but it may not be the most important factor.
Second, pay for performance may not be a panacea but it can help meet a goal of equal pay for equal work. Value is not just the time spent at a desk in an agency but may also include quality of work, quantity of work and the results of an employee’s work.
Third, a variety of factors do have an impact and may not be easy to change. These factors include the culture of the agency. Does the agency’s leadership believe in the concept and how much trust do employees have in their supervisors and agency executives? If these are missing, it will make pay for performance more difficult to implement.
Another factor is what the MSPB calls “effective supervision.” Part of effective supervision includes constructive and timely performance appraisal and fair treatment of employees in the agency’s human resources program.
Other factors the MSPB says are important include funding for the program so that the highest performers get the most money; effective measurement so that the agency measures the most important outcome; and evaluating and improving the system so that it evolves to achieve the results the agency wants instead of becoming a bureaucratic program that can’t be modified.