‘Pay-for-Performance’ isn’t as simple as it sounds

The three most controversial words in government right now might be:  “Pay for performance.”

A number of federal departments have recently announced that they’ll be instituting pay-for-performance plans for the first time, because they say they have a desperate need for motivated, high-quality employees … and that traditional reward structures just aren’t doing it.

At the same time, a number of prominent Democratic lawmakers have asked the Obama administration to suspend all pay-for-performance initiatives until they can be fully evaluated:  they suggest that pay-for-performance systems don’t really motivate federal employees.

What’s an administration to do?  What’s the best system for motivating civil servants?  

Two Saybrook management experts with significant government experience – one ultimately in favor of pay-for-performance, one leaning against it – say that the issue isn’t which reward system you’re using, but whether the system actually can recognize the behaviors you want to reward.  

If the system can do that, they agree, it’s probably a good one:  if it can’t, it’s likely a bad one. 


“The idea,” says Organizational Systems faculty member Dennis Jaffe, “is that better performing people get paid more. Sensible, reasonable. The problem is who does the rating and how is this done.  This is a crucial issue, and unfortunately it has been linked to anti-union and conservative politics, tarnishing the whole approach.”

Gary Metcalf, also an Organizational Systems faculty member, agrees:  “The issue is not really pay-for-performance.  The issue is motivation and performance management,” he says.  “There have been complaints for years about the inefficiency of civil servants, and many of the higher level managers in government are constantly frustrated by the inability to deal with problematic or underperforming employees due to the massively bureaucratic merit system.”

“But,” he adds, “treating government like a factory would only further confuse the roles between government and private business.”

 For Metcalf, the key problem with pay-for-performance is that unlike in the private sector, where performance can often be measured purely in terms of productivity, people tend to want different – and less quantifiable – things from their government.

“What we really want from them tends to be expertise and availability,” Metcalf says.  “For instance, if I need a surgeon I want one who is really good and available when I need her.  I don’t really want to evaluate her on how many gall bladders she removes per year because that’s not where I want her attention.  If she’s rewarded on how many operations she performs, rather than the attention I feel I’m receiving as a patient, then she’s getting rewarded for a criterion that makes me less happy as a patient, not more.”

In addition to finding the right criteria, Metcalf suggests that a pay-for-performance system will also need to find the right rewards.  In his experience, what motivates the best civil servants is recognition that they are working on behalf of the greater good, and the opportunity to make a real difference for their fellow citizens. 

“The ones who are  only motivated by money usually leave for private sector jobs anyway,” Metcalf says. “Others who just take a federal job for ease and security do need to be weeded out.”

Still, he admits, “being a federal employee shouldn’t mean taking a vow of poverty,” and money can play a part in a reward structure.  To the extent that pay-for-performance can be designed in a way that fits the motivations of the best civil servants, and rewards them for the appropriate criteria, Metcalf says he’s in favor of it.  But those are big “ifs.”

Jaffe agrees, but is more optimistic that a system can be designed appropriately. 

“There should be some cost for poor performance and attitude, and right now many public employees can’t be fired no matter how poor their attitude or performance gets,” he says.  “My feeling is that with proper safeguards and clear guidelines, people’s performance should be measured and paid for results.”

He adds:  “I don’t think a workplace can survive if there is no incentive to increase performance and make the system better.”