Does Pay for Performance Work in the Public Sector?

Group 2 Roy CantuNyla Flatau

Michelle Leftwich

Introduction

• Types of incentive programs• Issues with implementation• Benefits of implementation• Challenges of implementation• Desired outcomes of pay for performance• Actual outcomes of pay for performance

Types of Programs• Some private

companies offer vacation destinations

• United Airlines uses “Reach for the Skies”, incentive program that rewards savings certificates and travel certificates

• Microsoft, launched “Ship It” award

Types of Programs

• Profit-sharing - specific percentages of profits above and beyond target measures are used to reward employees

• Gain-sharing - used to reach specific goals that make employees feel better about their work because they contribute to the team

Private Sector

• Competitiveness is critical

• No external approval required

• Public perception isn’t important

• Market – primary evaluation role

• PFP common element

Public Sector

• Affordability is critical• Adjustments subject

to vote• Public perception is

critical• Market – limited

evaluation role• PFP is emerging

element in pay

Issues with implementation

• Microsoft – software group felt management had addressed them like children

• A slacker who might receive a good evaluation for poor performance, could put program in jeopardy

• Pay-for-performance programs assume that employees work primarily for money

Video

Benefits• Clarifies objectives• Planning tool• Employees are held

accountable/Better Transparency

• Improves productivity and efficiency

• Improves communication between management and employees.

Challenges• Lack of specifically

measurable objectives• Unionized employees• Requires continuous

training for new and existing managers

• Resistance from public servants and politicians.

Video

Conclusion

• Pay for performance can succeed in public entities:– only when the political climate is right– employees accept it– managers are trained to implement it fairly and

consistently– agencies monitor it regularly

• Evidence is mixed on whether or not pay-for-performance works in the public sector

Interview with Mike R. Perez, City of McAllen City Manager