Kyamanywa Teopista Nalule

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DECLARATION

This thesis is my original work and has not been presented for a degree in any

other University or any other award.

Signature: Date

Kyamanywa Teopista Nalule

D86/15729/05

We confirm that the work reported in this thesis was carried out by the candidate

under our supervision:

Signature: ..

Dr Namusonge Mary Jabeya Date.

Department Of Business Administration

Signature: . Date..

Dr Kukunda Elizabeth Bacwayo

Faculty of Social Sciences

Uganda Christian University


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DEDICATION

This work is dedicated to my sons Joseph, Alexander and Kenneth Kyamanywa

who have been there for me through thick and thin.


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ACKNOWLEDGEMENT

I start by thanking the Almighty God for the gift of life and the favours He

granted me during my PhD studies.

My unreserved gratitude goes to my supervisors: Doctor Namusonge Mary

Jabeya and Dr Kukunda Elizabeth Bacwayo for the facilitation with study

materials, guidance and patience they both offered me throughout this study. I

am also very grateful to the Management of Kampala City Council and the

Ministry of Education and Sports for the permission they gave me to conduct the

research in the respective organizations. The key informants in both

organizations are also highly appreciated for their participation in the study.

The following people are also greatly appreciated for their invaluable

contribution to the study: Professor Jonathan Chege, Dr Soita Paschal, Dr Ntayi

Joseph, Mr Kambaza Stephen and Associate Professor Mucunguzi.

Lastly, I am grateful to Kyambogo University for financial support given to me

to pursue these studies.


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TABLE OF CONTENTS

Page

Title page..i

Declaration.. ii

Dedication. ..iii

Acknowledgement....iv

Table of Contents..v

List of Tables....xi

List of Figures.xiii

Abbreviations and Acronyms...xiv

Abstract.xv

CHAPTER ONE

INTRODUCTION

1.1 Background to the study..1

1.2 Statement of the Problem.6

1.3 Objective of the study.7

1.4 Specific objectives...7

1.5 Hypotheses...8

1.6 Significance of the Study9

1.7 Scope of the Study..10

1.7.1 Geographical Scope10

1.7.2 Time Frame.....11

1.7.3 Content Scope.....11

.

1.8 Chapter Summary....13


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CHAPTER TWO

LITERATURE REVIEW Page

2.1 Theoretical Framework ..14

2.2 Related Literature on the study variables.18

2.2.1 Relationship between Decision Rights and Employee Performance .18

2.2.2 The Relationship between Incentives and Employees Performance ..29

2.2.3 Relationship between Performance Contracts and Employee

Performance.38

2.2.4 Relationship between Organizational Resources and Employee

Performance 42

2.2.5 Relationship between Performance Measurement and Employee

Performance.47

2.3 Government Policy..57

2.4 Critical Review of Major Issues..58

2.5 Summary and Gaps Filled in by the Study.62

2.6 Conceptual Framework64


CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Research Design...66

3.2 Target Population.67

3.3 Sample size determination...68

3.4 Sampling Design.69

3.4.1 Interview Sample.71


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Page

3.5 Sources of Data..72

3.6 Data Collection Procedure and Instruments...72

3.6.1 Procedure....72

3.6.2 Instruments..73

3.6.3 Questionnaire...74

3.6.4 Interview guides..78

3.7 Pre-testing the Instruments..79

3.7.1 Validity of the Questionnaire...79

3.7.2 Reliability of the Questionnaire...81

3.8 Data Management83

3.9 Data Analysis...83

3.9. Research Model...86


CHAPTER IV

PRESENTATION AND DISCUSSION OF THE FINDINGS

4.1 Sample characteristics..90

4.2 A Comparison between Performance Management Practices andEmployee Performance across Organizations 93

4.3 Factorial Analysis....96

4.3.1 Principal Components for Performance Management Practices.96

4.3.2 Performance Component Matrix101

4.3.3 Government Policy Component Matrix.104


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Page

4.4 Inferential Analysis107

4.4.0 Hypotheses Testing...108

4.4.1 Hypothesis 1: Relationship between Decision Rights and EmployeePerformance.108

.4.4.2 Hypothesis 2: Relationship between Incentives and Employee

performance...110

4.4.3 Hypothesis 3: Relationship between Performance Contracts and

Employee Performance in the Public Sector in Uganda..111

4.4.4 Hypothesis 4: Relationship between Organization Resources and

Employee Performance.113

4.4.5 Hypothesis 5: Relationship between Performance Measurement and

Employee Performance.....115

4.4.6 Hypothesis 6: The Interactive Effect among Performance

Management Practices, Government Policy and Employee

Performance......117

4.5 Conclusion120

4.6 Discussion of the Findings...121

4.6.1 Relationship between Decision Rights and employee performance.123

4.6.2 Relationship between Incentives and Employee Performance 128

4.6.3 Relationship between Performance Contract and Employee

Performance.133

4.6.4 Relationship between Organization Resources and Employee

Performance135

4.6.5 The Relationship between Performance Measurement and

Employee performance...139

4.7 Government Policy...145

4.8 Chapter Summary....................147


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CHAPTER VI

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

Page

5.1 Summary of the findings148

5.2 Conclusion..155

5.3 Recommendations..156

5.4 Areas for Further Research.158

5.5 Policy Implications..................159

5.6 Contribution to knowledge..160

5.7 Chapter Summary162

REFERENCES.163

APPENDICES

Appendix I Stratum sample size calculations for Kampala

City Council...182

Appendix II Stratum sample size calculations for ministry of

education and sports..184

Appendix III Questionnaire for Kampala City Council (KCC) and the

Ministry of Education and Sports (MoES) Middle

Managers, Supervisors and Operatives ...186

Appendix IV Interview Guide for Top Managers...195

Appendix V Interview Guide for Supervisors...196

Appendix VI Interview Guide for Operatives...197

Appendix VII Interview Coding Framework..198

Appendix VIII Interaction Analysis201

Appendix IX Chi-square Tests and Directional Measures206


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Page

Appendix X Partial Association of a 3-way Interaction (Relationship)Among Variables....210

Appendix XI Parameter Estimates of the Significant 3-way Interaction

(Relationship) Among Variables..212


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LIST OF TABLES

Page

Table 3.1 Employee Strata.70

Table 3.2 Summary of Study Variables and Their Operationalisation..72

Table 3.3 Showing Content Validity Index (CVI)..80

Table 3.4 Reliability Test Findings.82

Table 4.1 Showing Sample Characteristics of Respondents acrossKampala City Council and the Ministry of Education and

Sports...91

Table 4.2 Showing a Comparison between Performance Management

Practices and Employee Performance across Kampala City

Council and the Ministry of Education and Sport .....94

Table 4.3 Shows the Mann-Whitney (U) Test for the Mean Difference

between Kampala City Council and the Ministry of

Education and Sports in Terms of Performance

Management Practices and Employee Performance..95

Table 4.4 Showing Performance Management Practices Rotated

Component Matrix.97

Table 4.5 ShowingPerformance Rotated Component Matrix..101

Table 4.6 Government Policy Rotated Component Matrix..105

Table 4.7 Showing the Relationship between Decision Rights and

Employee Performance in the Public Sector in Uganda ..108

Table 4.8 Showing the Relationship between Incentives and

Employee Performance in Public Organizations

in Uganda .110

Table 4.9 Showing the relationship between Performance Contracts

and Employee Performance in the Public Sector

in Uganda .112


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Page

Table 4.10 The relationship between Organization Resources

and Employee Performance in Public Organizations

in Uganda ...114

Table 4.11 Showing the Relationship between Performance

Measurement and Employee Performance in the Public

Sector in Uganda..116

Table 4.12 A 3-way Interaction Effect (relationship) Among

Performance Management Practices, Government

Policy and Employee Performance in the Mode ...118


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LIST OF FIGURES

Page

Conceptual Framework64


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ABBREVIATIONS AND ACRONYMS

CFs Critical Success Factors

GDP Government Development Plan

IMF International Monetary Fund

KCC Kampala City Council

KPIs Key Performance Indicators

MoES Ministry of Education and Sports

PCA Pragmatic Content Analysis

PDM Participative decision making

PSRRC Public Service Review and Reorganization Commission

WB World Bank


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ABSTRACT

Uganda has witnessed persistent poor employee performance in publicorganizations since mid 60s, which scholars attribute to the 1966/67 crisis and

the political turmoil of the early 70s up to mid 80s. Despite governments effort

to avert the crisis by introducing reforms to improve employee performance, the

situation has not improved. The studys main objective was to investigate

whether there is a relationship between performance management practices

(decision rights, incentives, performance contracts, organization resources and

performance measurement) and employee performance in public organizations

in Uganda. The study was conducted at Kampala City Council and the Ministry

of Education and Sports. Data was collected from a stratified random sample of

517 participants and from a purposively selected sample of 32 respondents. A 5-

point Likert scale questionnaire and three interview guides were used to collectdata. The Principal component analysis was used to establish the number of

major components which accounted for most of the variance within the

performance management practices, government policy and employee

performance. The Mann-Whitney test was used to establish the mean difference

between the two organizations. Pearson chi-square test was used to establish the

relationship between the performance management practices and employee

performance. Log-Linear analysis was used to establish the interactive effect

among the performance management practices, government policy and employee

performance. Qualitative data was analyzed using pragmatic content analysis.

The results of the study revealed that the selected performance management

practices explained 54% of employee performance while 46% was explained byother factors. Findings also indicated that the Ministry of Education and Sports

had better performance management practices than Kampala City Council. The

study findings also established that performance management practices had a

significant positive relationship with employee performance apart from

incentives that had an inverse relationship with employee performance. Findings

also revealed that there was a 3-way order interactive effect among performance

management practices. Performance measurement, government policy and

employee performance had the most critical interaction effect. On the basis of

the findings, it was recommended that public organization managers and policy

makers must ensure that the performance measurement tool used in public

organizations is modernized to spell out what it really intends to measure.

Measurement should be a continuous process with immediate feedback given to

employees. The performance gaps must be addressed in line with government

policy. Secondly, public sector managers must ensure that the incentive systems

in place are modernized by making them more attractive so as to induce

employees to perform optimally. Managers must exercise procedural and

distributive justice in the administration of the rewards. They should also ensure

that decisions are decentralized to allow full employee participation in the

decision making processes. Lastly public sector managers must see to it that

organization resources acquisition and development are available and accessed

by all their employees.


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CHAPTER ONE

INTRODUCTION

1.1 Background to the study

At independence in 1962, the Uganda government inherited a Public Service that

had recruited public servants through open competition regardless of class,

ethnicity, race, sex or religion (Apuki, 2007; DFIDEA-U, 2001). Promotion was

purely on merit and performance was determined through confidential annual

reports on all public servants (Langseth, & Mugaju, 1996). The Public Service

was small but efficient, motivated, well-paid with fully equipped offices (Apuki,

2007). Due to the political turmoil and economic decline that prevailed during

the 1970s however, the Public Service deteriorated sharply and these principles

were rapidly eroded. A number of factors were responsible. These factors

included inter-alia rapid africanization of the service, creation of amorphous

structures, administrative inexperience, political interference and sectarianism

(Apuki, 2007; Yahaya, 1999; Langseth, & Mugaju, 1996).

Even before the political upheavals of the 1970s, the seeds of inefficiency and

poor performance had taken root. The problems in the Public Service were

linked to the political crisis that strangled the country in 1966/67 when the semi

Federal Constitution was abrogated and powers that had been delegated to the

Public Service Commission (PSC) and the Local Government were centralized

(Apuki, 2007; Mitala). This marked the beginning of the collapse of the viable

institutions in delivering services, supervising ethical procedures and spreading


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development (Apuki, 2007). In order to overcome this stagnation in the delivery

of services by Public Organizations, the Public Sector came up with reforms or a

new approach to the management of performance also known as New Public

Management (NPM) (Mitala, 2006). However, the above concerns have not

been achieved by the Ugandan public sector (Apuki, 2007; Mitala, 2006).

The current public sector reforms in Uganda are linked to the Structural

Adjustment Programmes, (SAPs) that were designed and advocated for by the

World Bank (WB) and the International Monetary Fund (IMF) since the 1980s

(Mitala 2006; World Bank Report 1996). Structural Adjustment Programmes

(SAPs) were designed in the 1980s from private sector principles as a response

by the major international creditor agencies, the World Bank (WB) and the

International Monetary Fund (IMF) to improve service delivery. This was in

response to the growing economic crisis and balance of payments problems

encountered by many developing countries subsequent to the two major oil

shocks and poor governance of the 1970s (Shaw, 1991; Marobela, 2008). The

new reforms, also known as New Public Management (NPM) have become a

common phenomenon around the globe (Marobela, 2008; de Waal, 2007; Kobia

& Mohammed, 2006; Mitala 2006; Shaw, 1991).

NPM applies practices such as downsizing of the public sector while improving

economic efficiency, demands for public accountability and applies modern

human resource policies like motivating workers through attractive incentives.


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Incentives include things like paying employees basing on their performance,

training and developing workers to improve performance, setting attainable

performance standards with realistic performance goals. Other incentives include

contracting employees on clear and attractive terms. Establishing performance

standards and measures of performance are some of the incentives emphasized

(World Bank Report, 1996). With these initiatives, the Public Sector is expected

to offer value for money while being transparent in all its activities and is urged

to be fair to employees and clients. NPM urges the Public Sector to become

competitive, customer-focused and mindful of shareholders while demonstrating

profitability. It is also expected to increase efficiency and flexibility as it

improves workersincentives (Marobela, 2008; de Wall 2007; Verbeeten 2007,

Mitala, 2006; Shaw, 1991).

In Africa, Public Service reforms have been introduced at different periods

(World Bank, 1993; 1996; Ayeni, 2001; Marobela, 2008). In Botswana for

instance, public sector reforms were introduced over three decades ago

(Marobela, 2008). The main reason of such reforms was to modernize and

enhance efficiency in the Public Service. The reforms introduced in Botswana

are modeled around the New Performance Management (NPM) (Marobela

2008). A government report (Republic of Botswana, 2000a, b) identified four

new interrelated reforms which are now being implemented throughout the

Botswana Civil Service namely: performance management system;

decentralization; human resources development; and computerization of


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personnel management system. In addition these are accompanied by the

privatization policy that sought to commercialize government activities. This

was the general framework from which the current reforms that were radically

changing the public sector are unfolding (Ayeni 2001; Mitala, 2006; Marobela,

2008).

According to Kobia and Mohammed (2006), in Kenya the government started

implementing public sector reforms way back in 1993 with the aim of improving

service delivery. The implementation of different types of reform interventions

has been carried out in three phases. However, newer interventions have been

introduced in the last six years (Kobia & Mohammed 2006). One such

intervention relates to performance contracting in the state corporations and

government ministries (Kobia & Mohammed 2006). Performance contracting is

part of the broader public sector reforms aimed at improving efficiency and

effectiveness in the management of public affairs (Kobia & Mohammed 2006). .

In Uganda, the Idi Amin military regime which captured power in 1971 brought

a total collapse of the Civil Service (Mitala, 2006). The political instability that

followed later (Okello Lutwas Military takeover) aggravated the chaos (Public

Service Reform Commission Report, 1990). The Public Service was ruined,

leading to many cases of low quality output, disregard of procedures, lack of

guidance and direction. The expansion of the Public Service for purposes of

patronage, and job creation, was accompanied by the duplication of services,


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poor co-ordination and a general decline in performance standards (Apuki,

2007). According to Mitala, (2006), Public Service became inefficient,

ineffective, unresponsive, demoralized, over-bloated without justification and ill

equipped with poorly paid civil servants.

With the ascent of the National Resistance Movement (NRM) Government into

power in 1986, one of the institutions that needed reform was the Public Service.

In 1989, the Government constituted the Public Service Review and Re-

organization Commission (PSRRC 1989/90) to undertake a study with a view to

coming up with recommendations on how best service delivery could be

improved in Public Service (Mitala, 2006).

The PSRRC made 255 recommendations to the Government and Results

Oriented Management (ROM) was one of the recommendations that were made.

The others included: Rationalization of Government Ministries and

Departments, downsizing the service, divesture of non-core functions,

improvement in physical records management, pay reform, issuance of

performance contracts, inclusion of stakeholders in the decision making

processes on issues that affect their jobs, retraining and development of workers,

introduction of new staff performance appraisal scheme, setting of National

Service Delivery Survey Standards among others. All these reforms were

borrowed from New Public Management Principles (Mitala, 2006).


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The current study sought to establish the relationship between performance

management practices and employee performance in public organizations in

Uganda. Public organizations are divided into two: that is, the Local

Government organizations and the Central Government organizations. Kampala

City Council is a Local Government organization charged with the provision of

social services to Kampala City dwellers. Kampala City Council was picked to

represent all public organizations in the Local Government because of its size

measured in terms of the number of employees. The Ministry of Education and

Sports on the other hand is a public organization under the direct responsibility

of the Central Government in charge of implementation of education related

government policies. By comparison with other Government Ministries, the

Ministry of Education and Sports is the largest in terms of employee capacity

and size (it has the Headquarters, Constituency Departments, Institutions of

Higher Learning, Training Colleges and Schools) (Ministry of Education and

Sports Databank, 2009).

1.2 Statement of the Problem

Although the Uganda Government has spent a lot of resources on the civil

service reforms since their introduction in 1991, employee performance in public

organizations is not improving Apuki, 2007; Mitala, 2006). This appears to be a

big problem for both the Government and the civil service generally.

Government reports and scanty studies adduced so far point to poor salaries, job

insecurity and insufficient physical resources as the major causes of poor


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employee performance in public organizations in the country (Werikhe, 2002;

Namutebi, 2000; Kyewalabye, 2008; Kyewalabye, 2009). However these factors

have not been verified empirically. In light of the recent civil service reforms

which were introduced in public organizations in the country, there exists very

limited empirical evidence that suggests that any relationship exists between the

reforms and employee performance in the public sector in Uganda (Werikhe,

2002; Namutebi, 2000; Apuki, Kyewalabye, 2009). The purpose of this study

therefore, is to fill a gap by providing empirical evidence on the relationship

between performance management practices (decision rights, incentives,

performance contracts, organization resources and performance measurement)

introduced in the public sector and employee performance in public

organizations in Uganda. The study was also intended to examine the interaction

effect among performance management practices, government policy and

employee performance in public organizations in the country which past studies

have not done so far.

1.3 Objective of the study

The objective of this study was to establish the relationship between

performance management practices and employee performance in public

organizations in Uganda.

1.4 Specific objectives

The study sought to address the following specific objectives:


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i. To establish the relationship between decision rights and employee

performance in public organizations in Uganda.

ii. To assess the relationship between incentives and employee performance

in public organizations.

iii. To examine the relationship between performance contracts and

employee performance in public organizations.

iv.

To establish the relationship between organization resources and


v.

To examine the relationship between performance measurement and


vi. To determine the relationship (interaction effect) among performance

management practices (decision rights, incentives, performance contract,

organization resources, performance measurement), government policy

and employee performance in public organizations in Uganda.

1.5 Hypotheses

H1 There is a relationship between decision rights and employee

performance in public organizations.

H2 There is a relationship between incentives and employee performance in

public organizations.

H3 There is a relationship between performance contracts and employee

performance in the public organizations.


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H4 There is a relationship between organization resources and employee

performance in public organizations.

H5 There is a relationship between performance measurements and

employee performance in public organizations in Uganda.

H6 There is an interaction effect (relationship) among performance

management practices, government policy and employee performance in

public organizations in Uganda.

1.6 Significance of the Study

Information generated in the study on the best performance management

practices might assist policy makers, managers and supervisors when they are

drawing performance improvement policies. Secondly, managers and

supervisors could operate from informed positions when drawing work

improvement plans. The study was also intended to create awareness among

operatives so that they are aware of practices that can enhance their performance.

In addition, the study may yield useful practical applications for consultants and

advisors in the area of performance management practices and their applicability

in public organizations in Uganda and at Kampala City Council and the Ministry

of Education and Sports in particular. The study might contribute to the

literature of performance managment that could be of use to scholars and other

interested parties.


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1.7 Scope of the Study

1.7.1 Geographical Scope

The study was carried out at Kampala City Council and the Ministry of

Education and Sports. Currently, Kampala City Council is in Kampala City, in

Kampala District in Uganda. It covers an area of 195 square kilometers and has

a population of about three million (3,000,000) inhabitants with an annual

demographic growth rate of 3.9% and has an average density of 51 inhabitants

per hectare (Population and Housing Census, 2002). The City Council is divided

into five geographic Divisions of: Kampala Central, Makindye, Nakawa,

Lubaga and Kawempe. The Divisions are expected to ease administration by

ensuring effective delivery of social services (education, health care, safe water,

sewage disposal and garbage management among others) to the City dwellers

(Kampala City Handbook, 2000). The Ministry of Education and Sports

(MoES) is located in Kampala City on Parliament Avenue opposite the

Parliamentary Building. This Ministry is in charge of regulating and providing

formal primary, secondary, further and university education for people in

Uganda. The Ministry of Education and Sports also regulates education for pre-

primary, over age, children in pastoral areas, and fishing villages and those in

employment who are too old to return to school.The Ministry of Education and

Sports has a work force of 300 full-timeemployees and its mission is to provide,

support, guide, coordinate, regulate and promote quality education and sports for

all persons in Uganda for national integration, individual and national

development (Ministry of Education and Sports 2003/04: Education Annual


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Performance Report). This implies that the two organizations which were

studied have a significant influence on the lives of many people in Uganda. This

makes them truly public service organizations.

The purpose of this study was to establish whether there is a relationship

between performance management practices and employee performance in

public organizations in Uganda with particular reference to Kampala City

Council, a Local Government Unit and the Ministry of Education and Sports, a

Central Government Ministry.

1.7.2 Time Frame

The study considered the period from 2005 to 2009. The period was singled out

because this was the period when new performance management practices were

emphasized by governments globally and by Uganda in particular. In addition, it

was from the year 2005 to 2009 that the public was keenly interested in

employee performance in public organizations in the country.

1.7.3 Content Scope

The study examined the relationship between performance management

practices and employee performance in public organizations in Uganda. It also

determined the interactive effect among performance management practices,

government policy and employee performance in public organizations. The

study was underpinned by the following theories: the Goal Setting theory of


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Locke, and Latham, (2002), which assumes that setting of performance goals

and involving employees in decision making processes on issues that concern

them and their jobs enhances workers performance. The Agent theory of

Bainman, (1990), that assumes that giving employees performance contracts

that are matched with adequate incentives increases workers performance. The

Resource Based View (RBV) of Barney, (1991) which assumes that when

employees are empowered with up-to-date organizational resources (knowledge,

skills and information technology) their performance increases.

The performance measurement theory, as proposed by de Waal, (2006) and

Kaplan, (2001) was a component of the study. According to de Waal, (2006)

and Kaplan, (2001), performance measurement system is a set of metrics used to

quantify both the efficiency and effectiveness of actions. Performance

measurement serves the purpose of monitoring performance, identifying the

areas that need attention, enhancing motivation, improving communication and

strengthening responsibility and accountability (de Waal, 2006; Kaplan, 2001).

The view was strongly supported by Schmitz et al in Busi, & Bititci, (2006) as

well.

In this study, the independent variables were: decision rights, incentives,

performance contracts, organization resources and performance measurement.

Government policy was the intervening variable while employee performance

was the dependent variable viewed in terms of quantity of work, efficiency,


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accuracy, quality and reputation of work, work excellence, innovation and

employee morale.

In conclusion, in order to assist the public organizations to improve performance,

it was necessary to establish whether there is a relationship between the

performance management practices (decision rights, incentives, performance

contract, organization resources, and performance measurement) in the public

sector. Public Organizations are regulated by government policy. For that

matter, it was imperative to establish the interaction effect among performance

management practices, government policy and employee performance in public

organizations.

1.8 Chapter Summary

This chapter was an introduction of the research and it explained the motivation

for the study. The statement of the problem, study objectives, research

hypotheses, significance and study scope were spelt out before the conclusion.

The following chapter presents a review of literature that is related to the study.

Chapter three explains how the supportive data was collected and analyzed. The

fourth chapter follows with the presentation and discussion of the study findings.

Finally, the study summary, conclusion, recommendations, policy implications

and areas for future studies appear in the last chapter.


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CHAPTER TWO

LITERATURE REVIEW

A number of prominent performance management scholars have advanced

theories in an attempt to explain underlying factors that affect employee

performance in work settings. This study has come up with specific theories that

explain the phenomenon of the possible underlying causes of poor employee

performance in public organizations. The literature addressed in this chapter has

a brief introduction of the theoretical framework. It then presents the study

variables preceded by their operational theories: decision rights and employee

performance; incentives and employee performance; performance contracts and

employee performance; organization resources and employee performance;

performance measurement and employee performance and government policy

respectively. Finally, a critical review of major issues is discussed followed by

the summary and an illustration of the conceptual framework.

2.1 Theoretical Framework

The study was underpinned by various performance management theories

advanced by a number of scholars who tried to explain the phenomenon

underlying employee performance in public organizations. Four theories were

used to operationalize the study.


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2.1.1 Goal Setting Theory

The goal setting theory which assumes that a direct relationship exists between

the definition of specific and measurable goals and performance was the first to

be applied in this study. If managers know what they are aiming at, they are

motivated to exert more effort, which increases performance (Locke & Latham,

2002). The theory was advanced by Latham & Locke, (2002) who emphasized

goal setting and encouragement of decision rights as a basis for employee

performance. de Waal, (2007) observes that taking responsibility for results

requires that organizational members are given the opportunity to influence their

results favorably and have the freedom to take action. This implies that people

have to be authorized by their managers to independently and swiftly take action

on problems without having to ask for permission first. Decision rights allow

greater involvement of employees in deciding on issues that affect their work

(Locke & Latham, 2002). This implies that workers have a say in defining the

right Key Performance Indicators (KPIs) and the mandate to establish Critical

Success Factors (CSFs) in relation to their job responsibilities. According to

Armstrong, (2006) employees are most likely to meet or exceed performance

goals when they are empowered with the authority to make decisions and solve

problems related to the results for which they are accountable.

The performance goals of an organization represent a shared responsibility

among all its employees each of whom has a stake in the organization's success.

A critical challenge for private and public organizations alike is ensuring that


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this shared responsibility does not become an unfulfilled responsibility.

Accountability helps organizations to meet this challenge. Underlying employee

empowerment is management's view of its employees as assets that are capable

of contributing to the growth of their respective organizations rather than costs to

be borne by the Organizations. The contributions of individuals and teams are a

starting point for enumerating the results for which they are accountable (Locke

& Latham, 2002; Armstrong, 2006). The goal setting theory was used to support

decision rights in the study.

2.1.2 The Agency Theory

Baiman, (1990), stresses that the agency theory assumes that a relationship exists

when one or more individuals (called principals) hire others (called agents) in

order to delegate responsibilities to them. The rights and responsibilities of the

principals and agents are specified in their mutually agreed-upon employment

relationship. Agency theory attempts to describe that relationship using the

metaphor of a contract. Agency theory assumes that individuals are fully

rational and have well-defined preferences and beliefs that conform to the

axioms of expected utility theory (Bonner & Sprinkle, 2002). Furthermore, each

individual is presumed to be motivated solely by self-interest (Baiman, 1990).

This self-interest can be described in a utility function that contains two

arguments: wealth (monetary and non-monetary incentives) and leisure.

Incentives are extrinsic motivators where pay, bonuses or career perspectives are

linked to performance (Bonner and Sprinkle, 2002). Incentives that are not


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contingent on performance generally do not satisfy this criterion; thus, the

agency theory suggests that incentives play a fundamental role in motivation and

the control of performance because individuals have utility for increases in

wealth (Bonner, & Sprinkle, 2002). The agency theory was used to explain the

importance of incentives and performance contracts in the study.

2.1.3 The Resource Based View

An alternative to the agency theory is the Resource Based View (RBV) as a

model of understanding strategic organization resources that can enhance

employee performance. According to Barney, (1991) key resources have been

identified as intangible assets (such as client trust and relationships) and

capabilities or tangible resources (such as skills and knowledge, technology and

information). The resource based view was used to support organization

resources in the form of knowledge, skills and information technology in the

study.

2.1.4 The Performance Measurement theory

Finally, de Waal, (2007) and Kaplan, (2001) observe that in order to assess the

success of a performance management system, there is need to measure the

structural side which deals with the structure implemented for performance

measurement. This usually includes critical success factors, key performance

indicators and often a balanced scorecard and the behavioural side whichdeals

with organizational members and their use of the performance management


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system (de Waal, 2007 and Kaplan, 2001). The performance measurement

theory was used to explain the importance of employee evaluation in the study.

The question arising here is whether there is a relationship between the

performance management practices (decision rights, incentives, performance

contracts, organization resources and performance measurement) as advocated

by the selected theories and views in the study.

2.2 Related Literature on the Study Variables

2.2.1 Relationship between Decision Rights and Employee Performance

The goal setting theory (Locke & Latham, 2002), was selected to guide this

aspect of the study. The literature below explains the linkage between decision

rights and employee performance.

Decision rights allow greater involvement of employees in deciding on issues

that affect their work. So workers have a say in defining the right Key

Performance Indicators (KPIs) and establish Critical Success Factors (CSFs)

concerning their job responsibilities. Armstrong, (2006) observes that employees

are most likely to meet or exceed performance goals when they are empowered

with the authority to make decisions and solve problems related to the results for

which they are accountable. This is in line with Hewitt, (2002) who argues that

the contributions of individuals and teams are a starting point for enumerating

the results for which workers are accountable.


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According to Michelle, (2007) and Helmut, (2002), the most important decisions

in an organization affect not only the decision maker but also other members of

the organization. The allocation of decision rights according to Helmut (2002);

Jensen and Mechelle (2007) can resolve the problem of externalities that may

have impact on other stakeholders when important decisions concerning them

are made without their participation. According to Osterman, (1994), around

45% of workers decide the mode of doing their job. Aghion, and Tirole, (1997)

support the view when they observe that as interests between management and

employees become more aligned, delegation of decision-making rights motivates

employees to improve their performance without causing severe disruption to the

decision-making process. Juliette and Jeff (2005) however argue that there are

certain circumstances (such as sensitivity and nature of the matter) under which

the employer may reserve authority over decision rights.

Michelle, (2007) observes that employee involvement in decision making

sometimes referred to as participative decision-making (PDM) is concerned with

shared decision making in the work situation. In support of the argument, Hewitt

(2002) notes that there are certain individual contingency factors which may

support participative decision-making. For example, when the sets of choices

are clear and employees show greater desire for job involvements, it is healthier

to let them participate in the decision making process. Participative decision-

making in organizations may also be necessary when developing greater

individual job responsibility.


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In agreement with Hewitt, (2002), Locke and Schweiger, (1979) stress that

decision making should be a joint process betweenmanagers and subordinates.

A democraticemployer sits with the employees to decide on the future course

of his business (Michelle & Lori, 2007). The observation assumes that

employees are partial owners of the business. Thus participating in deciding on

what should be done simply determines the future course of their business

through objectives.

On the other hand employees in public organizations are only hired to achieve

the vision(s) of their employer (government). The assumption would therefore

not hold in case of public organization workers (Lock & Schweiger, 1979).

Public organizations are there to serve public interests and hence their out look

should hinge on the interests of the public (Jensen & Meckling, 1992).

However, Aghion and Tirole (1997); Ghosh, (2009) argue that participative

approach to decision making is inappropriate when choices are complex,

difficult to define and varied in nature. This is a situation where task

interdependence is very high; the environmental change is rapid thus hindering

employee participation in decision making. This complexity can be resolved

through delegation. Julliette & Jeff (2005) contend that that employee

participation in the decision making process can also be realized through

delegation in which the subordinates gain greater control, greater freedom of

choice with respect to bridging the communication gap between management

and the workers. Supporting Julliette & Jeffs (2005) observation, Bonner and


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Sprinkle, (2002) stress that employee involvement in the decision making

process is the employees chance to participate in an organizations strategic

planning activities. In support of Bonner and Sprinkles (2002); Julliette and

Jeff, (2005) argue that the future direction (goals and objectives) of an

organization is determined by the employer when he/she promotes employee

involvement in deciding the course of action to take in order to achieve the

already established objectives. This improves workerscommitment (Julliette &

Jeff 2005). However, Ghosh, (2009) on the other hand observes that public

goals and objectives are in most cases determined by the government and then

communicated to the responsible public organizations for implementation. For

that matter, it is up to the concerned public organizations to ensure appropriate

development of the strategic plans for the achievement of public goals and

objectives by selecting expert and knowledgeable employees to handle the

process. However what would be most appropriate is to involve employees in

the strategic planning of activities before implementation (Michelle, 2007). This

is likely to motivate workers because they would only be implementing their

own decisions (Locke & Schweiger 1979; Helmut 2002; Michelle, 2007).

Barringer and Bleudorn (1999) argue that full employee involvement in decision

making allows for the decentralization of decision rights. That is, the concerns

of the subordinates are catered for during planning. Similarly, the empirical

studies by different researchers: Wagner (1994); Cindy (2002); Cappelli and

Neumark (2001); Awolabi and Adeola (2011) revealed that decentralizing


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decision rights alleviates the burden on top management as well as cutting

unnecessary communication up and down the hierarchy and reduces the agency

costs.

Partial employee involvement in decision making (centralization of decision

rights) on the other hand ignores the concerns of the frontline employees (Cindy,

2002). Barringer and Bleudorn, (1999); Li et al., (2006) advocate for full

employee involvement in decision making because frontline employees are

people closest to the customer and are knowledgeable about market needs and its

dissatisfaction. Frontline workers also know how to address the dissatisfaction -

which is a central element in the success of any organization. On the contrary,

an empirical study by Kazuyuki and Kanamori, (2008) suggests that with

advancement of information communication technology (ICT), centralization of

decision rights can still capture the concerns of the floor employees in an

organization which would have only been possible through decentralization of

decision rights. This can be through the interaction between centralized and

decentralized decision making enabled by the ICT, where employees feed all the

necessary information about their customers and their decisions into the

computer system (Kazuyuki & Kanamori, 2008). This information is then

accessed by top management, screened and evaluated, decisions made by the top

management and then communicated to the concerned employees via ICT

systems (Kazuyuki & Kazuyuki, 2008).


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Spreitzer and Mishra (1999) argued that having high performing employees is a

desire for all organizations in order to remain competitive. However, having a

high performing organization requires committed employees who appreciate the

factors that influence employee performance (Kazuyuki and Kanamori 2008).

An organization's ability to create and be innovative is the most important source

of its competitive edge (Kazuyuki & Kanamori, 2008). However, creativeness

and innovativeness partly hinge on an employees ability to make decisions

concerning how best to do his or her work and its future course. Employees who

cannot make decisions concerning their work are in most cases not creative and

innovative. This is so because it is not up to them to decide what to do, how to

do it, when and what to improve or change because such decision matters are

centralized at the management level (Takahito & Kazuyuki, 2008).

Markey, (2006) argued that the participation of employees in the decision

making significantly improves employees performance and hence

organizations increased ability to meet its objectives. According to Black,

(2001), the expected benefits of employees involvement result in quality

improvement, better information flow, clear tasks goals, and quality decisions.

Increase in employees commitment and acceptance of decisions fosters a sense

of decision ownershipdue to having been involved in decision-making. This

increases the chances of effective implementation of the organizational

objectives.


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Empirical evidence further suggests that employeesbetter performance hinges

to a great extent on workers involvement in the decision making processes

(Arthur, 1994; Carter, 1995). These scholars stressed that employee

involvement in the decision making process contributes to efficiency because

they gain the capacity to enhance the quality of decision making by increasing

the inputs and promotes commitment to the outcome of the decision making

process in the workplace.

According to Spreitzer and Mishra (1999), employees who have made decisions

concerning their own work and how best to do it were very satisfied with what

they were doing. Their performance was found to be significantly high

compared to the employees who lacked influence in their own work and how to

handle it. In support of Spreitzer and Mishra (1999), Chang & Lorenzis (1983)

research findings revealed that a significant relationship exists between

frequency of employees consultation and organization commitment. The study

further established that if organizations are to realize any significant increase in

employees performance, workers involvement in decision making processes

should be considered as a crucial aspect of their performance. Wagner (1994)

similarly measured and discussed the benefits accruing to the organizations due

to employees involvement in the decision making processes. Findings of his

study revealed that when employees are adequately informed about matters

concerning them and are afforded the opportunity to make decisions relevant to

their work, organizations are likely to benefit through improved employee


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performance. Individual employees are also likely to benefit through job

satisfaction. These findings are supported by Williamsons (2008) later study

that established that employee involvement in the decision making on issues

concerning their jobs increases workers performance.

As a result of incorporating workers ideas and information in the decisions

made by organizations (organizational flexibility), product/service quality, may

improve Williamson, (2008). This is because employee involvement in the

decision making process contributes to greater trust and a sense of control on the

part of the workers. Through employee involvement, resources required in

monitoring employee compliance like supervision and following the work rules

are minimized. Reduced costs and the saved money can be spent on the

development of further employees decisions (Arthur, 1994; Spreitzer and

Mishra, 1999). Similarly, Kemelgor, (2002), observed that when employees are

given the opportunity to contribute their ideas and suggestions during decision

making, increased organizations performance is likely to be realized. This is

because greater employee involvement in decision making maximizes divergent

view points and perspectives. Empirical findings by Owolabi and Adeola,

(2011), too found that in order for an employee to perform well, she/he must first

feel good about what she/he is engaged in (job satisfaction). On the contrary,

Jensen and Meckling, (1990), argue that involving employees in the decision

making in ways that maximize their/organizationsperformance is an extremely

difficult and controversial management task. This is because organizations may


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be indifferent about employees effectivenessin the making of quality decisions

that are consistent with the organization mission and objectives.

Jensen and Meckling, (1990), however observes that there are costs to be

considered before involving employees in the decision making process. The first

one rotates around delegating decision rights to employees who have the relevant

information but whose motivation and goals do not align with those of the

organization. The second aspect is the difficulty of transferring the relevant

information from the source to the decision maker because of arch of distortion.

Public organizations in Uganda seem to suffer from poor performance due to the

two costs identified (Jensen & Meckling 1990).

Poor performance of public organizations in Uganda has continued to be

witnessed despite the effort taken by the Public Service Commission to employ

well qualified and adequately informed public servants. High cost of gross

negligence of duty coupled with organizations inability to transfer the relevant

information from the source (the public) to the decision and policy makers in

public organizations, has led to poor performance. This situation results in gross

errors arising out of taking uninformed decisions and policies by the decision

makers. Cindy, (2002) argues that by involving employees in the decision

making process at levels where these combined costs are minimized, public

organizations can get optimal decision-making efficiency and therefore better

performance.


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Williamson, 2008); Jacobs (2005), argue that finding an organizational spot

where decision costs are minimal is only part of the battle. Public organizations

must still deal with the fact that employees who are charged with decision

authority are inevitably motivated by their own personal and professional goals,

some of which are inconsistent with those of the organization. In order to

overcome these complexities in decision making, Jacobs (2005) recommends the

following steps: routine review and update on how decision authority is

distributed across employees inpublic organizations. What employees do, and

the environment in which they operate continually changes, hence decision-

rights updates must become routine. A review should carefully assess where

various types of decisions are being made in the organization and whether those

particular points are still the most crucial in achieving organizations objectives.

In a study by Lee, (2008) about the effect of decision rights and noise pollution

control that was conducted at the Southern Methodist University, findings

revealed that workers who were involved in the decision making processes

exhibited excellent performance compared to their counterparts who were denied

decision rights regarding the option to control noise pollution. Lee (2008)

reported that the experiment involved two groups with one group being

subjected to loud noise and in the middle of the exercise participants were denied

the right either to stop the loud music or let it continue. The second group was

subjected to the same loud noise and half-way the exercise, participants were

given the option of either stopping the noise or let it continue. The experiment


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had differing implications on employee performance. Participants who were

denied decision rights demonstrated significant deterioration in their

performance. Their thinking became emotional, unimaginative, and dull. The

group that was given choices exhibited better performance. Much as the group

that was accorded decision rights experienced the same amount of unpleasant

noise as the group which had no option, its participants thought process

remained unaffected. The group with decision rights engaged in deep reflective,

creative thought and their performance was high. Thus, it was not the negative

external situation, but the perceived lack of involvement in the decision making

process for the group without decision rights, that caused the participants

diminished thinking capacity and thus poor performance.

In conclusion, the above literature on decision rights emphasizes the need for

involvement of employees in the decision making processes on issues that

concern them, their jobs and their work places if increased performance is to be

realized. It has also been argued that participative decision making gives

workers a feeling of belonging (psychological safety) and makes them

responsible and accountable for their actions. In the process performance

improves. It remains to be seen whether there is a relationship between decision

rights and employee performance in public organizations in Uganda.


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2.2.2The Relationship between Incentives and Employees Performance

The Agency theory asserts that a relationship exists between incentives and

employee performance (Bainman, 1990 in Smith & Hitt, 2007). This is in

agreement with other scholars who assert that incentives are rewards for a

specific behaviour, and they are intended to encourage and sustain good efforts

(Banda, 2007; Armstrong, 2006; Ivancevich, 2004). Similarly, Adams & Hicks,

(2000) view incentives as inducements or supplement rewards that serve as

motivational devices for a desired action or behaviour. Ivancevich, (2004)

contends that motivating employees through incentives is crucial for morale

boosting in order to perform the seemingly challenging responsibilities and solve

problems thus achieving organizational objectives. Beardwell & Holden, (2001)

explain that incentives are either direct and extrinsic in nature or indirect and

extrinsic. According to the two scholars, examples of direct incentives are

financial benefits such as pay, salaries, salary top ups, subsidies, commissions

and bonuses, pension, illness/health/life insurance; over-time, clothing and

housing allowances. Ivancevich, (2004) and Banda, (2007) observe that gain

sharing is another direct incentive that can induce the commitment of employees

to perform. Indirect incentives (intrinsic in nature) may include such benefits as

subsidized meals, clothing, accommodation, transport, gifts, travel, scholarships

for workers and their children and tax breaks.


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Adam and Hicks, (2000), contend that indirect incentives may also include

flexible schedules, part-time or temporary work; sabbatical, study leaves,

holidays and vacation. Improving the work environment conditions for example

by putting in place occupational health and safety measures, putting in place

recreational facilities for workers to relax in, extending school access for

employeeschildren; having proper infrastructure such as path and walk ways,

ventilated offices, and transport are motivating facilities that should be available

in work places if high employee performance is to be realized (Adam & Hicks,

2000).

In a study by Rajesh and Samwick, (2003) that sought to prove whether

incentives were aligned with employee responsibilities, it was established that

managers with explicit divisional responsibilities had lower pay-performance

than managers with broad oversight authority. Managers with broad oversight

authority in turn had lower pay-performance (incentives) than Chief Executive

Officers. Rajesh and Samwick, (2003) confirmed that incentives differ across

job classifications. The observation is important because of two reasons. First

of all it is evident that the internal structure of an organization aligns incentives

according to responsibilities among the various management levels. In addition,

pay-performance incentives differ across the managerial levels because of the

way organizations are structured. Thus incentives are simply meant to induce

the various employees especially managers, to take optimal actions. If incentives

are aligned to each employees responsibilities in the organization, it motivates


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them to increase their efforts in relation to the incentives given to them (Murphy

& Oyer, 2001; Harold, 2003).

In contrast to the argument by (Harold, 2003; Murphy and Oyer), Rajesh and

Samwick (2003) noted that focusing on the incentives of the top ranking officers

only in public organizations may be an effective short term strategy but with

disastrous long term consequences. This is so because ordinarily, objectives get

accomplished through the activities of the lower employees. In agreement with

Murphy and Oyer, (2001), Barron and Glen, (2003) contend that without the

lower employees being motivated to do their work well, however much the top

ranking officials are motivated; objectives will not be satisfactorily

accomplished. Therefore, public organizations should motivate all their

employees regardless of their rank in the organization hierarchy (Harold, 2003).

An empirical study by Harold, (2003), proved that incentives increase the value

people attach to work goals. Rewarding people for exceeding targets motivates

them to spend more time on the rewarded tasks which leads to heightened

interest and satisfaction. It also appears to strengthen self-confidence and

employee loyalty. Well-designed and implemented incentive systems increase

employee motivation, commitment, cost effectiveness and congruence (Harold

2003). In support of the above findings, empirical evidence adduced by Werikhe,

(2002), confirmed that 95% of the workers who participated in his study

confirmed that adequate rewards can induce employees to attain the desired


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results. In contrast, Verbeeten, (2007), found that incentives only improve

quantity but not quality performance.

Burgess & Ratto, (2003) in their study established that there were four major

types of incentive systems. In order to induce and sustain employee effectiveness

and efficiency, the appropriate incentives are: quota-based (performance goals);

piece rate-based (produce more units); tournament-based (competition); fixed-

rate based (specified amount for specified work). Similarly, other empirical

studies on pay for performance (performance goals) as an incentive: Namutebi,

(2000); Adams and Hicks, (2000); & Baker, (2004), confirmed that pay for

performance as an incentive system is effective and can be adopted by public

organizations as an incentive system to motivate their employees.

According to Sean, (2008), pay for performance is effective in motivating

employees since their rewards and exact pay hinges on their actual performance.

In line with Abraham Maslows hierarchy of needs theory, Armstrong, (2006)

suggests that man will always want to satisfy his physiological needs first.

Assuming that man can only satisfy his basic needs from his own pay and if his

pay is realized from his own performance, then he will increase his effort in

order to perform well and get higher pay so as to satisfy more basic needs. So,

in this case, pay for performance would have acted as an inducement to motivate

man (employees) to perform better.


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In support of Seans (2008) observation, Harold, (2003) in an extensive survey

he carried out in 1,000 United States organizations, it was also established that

various forms of incentive systems greatly increased employees performance.

The study indicated that tangible incentives (money, gifts, travel) increase

performance by an average of 22%. Individual-based incentives resulted in a

27% gain while team-based incentives improved performance by 45%. The

study also confirmed that incentive systems work best when current performance

is inadequate, and that the cause of inadequate performance is motivational and

that desired performance can be quantified (how much; how often; how many)

(Harold, 2003).

Harold, (2003) further argues that for incentives to increase performance, goals

must be challenging and achievable. In terms of effectiveness of the incentive -

monetary or gift/travel - the study ascertained that monetary incentives yield a

27% increase in performance and gifts and travel incentives provided a 13%

increase. Findings of this study established further that goal achievement

incentive systems have a positive impact on employee performance too. The

study revealed that 57% of the survey respondents surpassed their organizations

performance objectives and 92% met partial performance objectives for which

the incentive systems had been designed.

Sprinkle, (2000); Li, (2002) and Locke (2004), argue that sustaining

administration of adequate incentives to individual employees as their effort is


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measured with immediate feedback increases workers effort. Individual

employee performance in the long run improves due to the experience gained

through learning arising out of increased effort on a particular task. Sprinkle,

(2000), carried out a repeated measurement experiment between two groups (one

group was given incentives and the other was a control group) over different

periods on a cognitive task. The results suggested that performance is likely to

become more incentive sensitive over time. With incentives in place, employees

are likely to increase their effort especially on tasks involving reasoning in order

to find optimal solutions. Through task repetitions and feedback by management

regarding the outcome of an employees efforts, experience is gained and this

helps employees to eliminate many reasoning errors. Similarly, Namutebi,

(2000) in her empirical study, found that with respect to timeframe and

effectiveness of incentive systems, long-term incentive programs had the

strongest effect (44% performance gain) compared to intermediate term (30%

increase in performance) and short-term incentives (20% performance gain)

respectively.

In agreement with Namutebi, (2000), Kyewalabye (2008) noted that there will

always be an increase in performance when employees receive incentive-based

contracts. Workers on an incentive-based contract continually exert more effort

than employees receiving the flat-wage contract. Therefore Sprinkle, (2000);

Kyewalabye (2008) conclude that employees receiving the incentive-based

contract spend more time on a task which results in higher performance than


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workers who receive the flat-wage contract.Sprinkle, (2000) further argues that

performance in terms of effort is just a function of the amount of time spent

along with the incentives attached to the accomplishment of a particular task.

Taking a cognitive example used by Sprinkle, (2000), as time goes on, an

individual given incentives should spend less time on a particular task than

individuals without incentives. Sprinkle, (2002) gives conditions necessary for

individuals receiving incentive-based contract to perform better compared to

individuals receiving a flat-wage contract: the form of the incentive contract

should motivate effort maximization. He recommends that public organizations

should design attractive incentive programs and implement them efficiently.

McGuire, et al., (2003), suggest that it is good to reward employees basing on

their social performance since public organizations to a large extent have a social

responsibility towards the public. A lot of literature advocates for an executive

incentive system (Burgess & Rotto, 2003; Rajesh & Samwick, 2003;

Kyewalabye, 2008; and McGuire, et al., 2003) to be established in public

organizations if public goods and services are to improve. They argue that

executive incentives are a visible and potentially important mechanism through

which Directors of public organizations direct managerial attention to specific

objectives having both financial and social implications to the public. Incentives

can therefore be a potentially important mechanism for directing managerial

attention to public social objectives.


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McGuire, et al., (2003), further argues that executive compensation can be

manipulated by the board of directors of public organizations to reward

managers for pursuing specific objectives which are in public interest. Thus in

developing executive compensation plans and awarding executive incentives, the

Boards of Directors can encourage management to pursue social, as well as

financial objectives. In this case, the financial rewards and other forms of

incentives given to executives may signal the public organizationscommitment

to social performance, and may provide motivation for the achievement of social

policies (Johnsen, 2005; Rajesh & Samwick, 2003). According to Dixit, (2002)

and Lawler, (1992), performance improvement and productivity enhancement is

necessary in public organizations. In order to achieve this, public organizations

can embrace incentives in order to motivate their employees to use resources

more effectively and efficiently (Shaw; et al. 2002; Johnsen, 2005). In

agreement with scholars who advocate for the importance of giving equitable

incentives to public employees, McGuire, et al., (2003) contend that the public

sector should increasingly link their employee incentives to their performance as

a motivating factor.

This is in line with Prendergasts (1999), earlier view when he argued that

performance should be the basis for awarding incentives to public officials. Pay

for performance is a very good incentive in motivating employees to perform

better since their earnings are based on individual performance. Thus the higher

the output, the higher should be the pay. This method of awarding incentives can


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best work where individual performance can be measured, or where a teams

performance can be measured so that when rewarded, it can maximize its

members potential. This can also act as a solution where work interdependence

is rampant so that employees interdependence in performance can easily be

monitored, measured and rewarded accordingly (Prendergast, 1999).

In conclusion, most of the reviewed literature on incentives supports a view that

there is a relationship betweenincentives and employee performance. Scholars

argue that when performance is matched with meaningful incentives, employees

morale is boosted and in the process their job satisfaction and commitment to

performance increases. Incentives are also said to enhance workers loyalty to

their organization thus positively and strongly influencing workplace

performance (quantity and quality). However, public organizations must boost

incentives only when there is a motivation gap and during situations of

challenging goals. It is essential to involve targeted recipients in the selection of

incentives where possible and to ensure equity and fairness to all employees. To

achieve incentive system success, the literature proposes that public organization

should focus on implementation, communication and continuous monitoring of

the incentive system and performance. The issue arising is whether there is a

relationship between incentives and employee performance in public

organizations in Uganda and thus the need for this study.


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2.2.3 Relationship between Performance Contracts and Employee

Performance

The Agency theory assumes that relationship exists between performance

contracts and employee performance (Bainman, 1990 in Smith & Hitt, (2007).

Other scholars (Kobia and Mohammed, 2006) argue too, that governments all

over the world, view performance contracting as a useful managerial tool for

articulating clearer definitions of public objectives and supporting new

management monitoring and control methods. Performance contracting

organizes and defines tasks so that management can perform them

systematically, purposefully and with reasonable probability of achievement

(Kobia & Mohammed, 2006).

Performance contracts are based on the assumption that what gets agreed on,

gets done; if you cannot set and measure performance, you cannot reward it. If

you cannot recognize failure, you cannot correct it and if you can set targets and

show results, you can win public support. Kobia & Mohammed, (2006) observe

that performance contracts originated from the perception that the performance

in the public sector has been consistently falling below the expectations of the

public. Thus performance contracting is part of broader public sector reforms

aimed at improving efficiency and effectiveness in the management of Public

Services. Supporting the view held by Kobia and Mohammed, (2006),

Kyewalabye, (2008), recommended that clearly specified performance contracts

are some of the factors that help to enhance employee performance in public

organizations because of their motivational drive. Proper design of performance


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contracts is very essential and should be a major concern to public organizations.

In the design of performance contracts, public organizations should concentrate

on the selection of appropriate performance indicators (parameters) if

performance contracts are to be effective. According to Poppo and Zenger

(2002), if performance contract parameters are not properly chosen or if they

contain some ambiguities, they may act as a basis for misusing public resources

by the civil servants. This state of affairs may prevail under the disguise of

responding to public needs through using wrong strategies which benefit the

employees and using improper ways to react to uncertainties. Thus performance

contracts must be designed after carefully examining and adapting to particular

public needs.

Yadong, (2002), suggests that the expected performance by the employer (the

principal) from the employee (the agent) should be primarily governed by the

performance contract that helps obviate moral hazards and attenuate the leeway

for opportunism. It establishes the condition and guidelines for the process of

carrying out the duties and responsibilities by public employees. A performance

contract provides an expected performance bound and an institutional framework

in which an employees rights, duties, and responsibilities are codified and the

goals, policies, and strategies underlying the anticipated contingencies are

specified. In the public sector, employees performance has to be governed by a

complete contract specifying what an employee is expected to do in order to

achieve expected performance. Yadong, (2002), further suggests that for


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contracts to be effective, cooperation among the employees and between the

employer and the employee has to be nurtured. This is however a dimension that

is often neglected in the designing of performance contracts yet it is an aspect

which is capable of influencing the feasibility and effectiveness of performance

engagements.

Yadong, (2002), continues to observe that performance contracts should be

drawn to indicate job responsibilities, flexible clauses and the attached rewards.

This is because when contract are clearly drawn, it reduces the uncertainty

faced by public organization decision makers and the risks stemming from

opportunism on the part of employees. It provides a safeguard against ex-post

performance problems by restraining employees abilityto pursue private goals

at the expense of organization goals and objectives. On the contrary, Bernheim

and Whinston, (1998) suggest that incomplete contracts may be optimal in

situations where some elements of enforcement are unverifiable. However, what

is unverifiable is based on the assumption of the uncertain environment but this

can be verified by properly adopting contingent plans in the performance

contracts which cater for the uncertain environment, thus there is no need to

adopt incomplete contracts basing on the suggestion by Bernheim and Whinston,

(1998).

When public organizations adopt incomplete performance contracts, ambiguity

may result which creates a breeding ground for shirking responsibility, non


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performance and shifting of blame. It further raises the likelihood of conflict

through authority overlaps, and hinders the ability to coordinate activities,

utilization of resources, and implementation of effective strategies. Thus public

organizations when designing employee performance contracts should clearly

highlight each employees responsibilities, authorityboundaries, and the chain of

command in order to avoid ambiguities (Yadong, 2002; Wu, & Roe, 2005).

Grinblatt and Titman, (2002), suggest that through performance contracts, it is

easy for employee performance to be screened in order to establish a match or

any deviations between the contractual performance and the actual performance.

If deviations are present, an account can easily be given, so as to find out

whether the performance mismatch has its roots in the way performance

contracts were designed or from the ineffectiveness of the employee. Whichever

way, the problem can be identified and rectified thus performance contracts can

be a useful managerial instrument in influencing employee performance in

public organizations.

In conclusion, public organizations should realize the importance of performance

contracts and their ability to stimulate employee performance especially when

they are matched with the desired incentives. Establishing a relationship

between performance contracts and employee performance was among the

objectives of this study.


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2.2.4 Relationship between Organizational Resources and Employee

Performance

The Resource Based View (RBV) of the firm assumes that a relationship exists

between the organizations key resources (knowledge, skills and information

technology). Possession and identification of key resources embodying these

essential features, along with their effective development and deployment,

allows the firm to achieve and sustain competitive advantage. Much as superior

performance is usually measured in financial terms such as higher profits,

increased sales or market share in private concerns, in public organizations,

performance measured through efficiency and effectiveness of social service

delivery. Whether it is in the private or public sector, superior performance

needs competence driven personnel equipped with adequate knowledge and

skills. These have to be backed by up-to-date ICT in order to drive organizations

to greater heights. Priem and Butler, (2001) observe that the intangible assets

and capabilities could be appropriated by the firm because the unique

combination of company philosophy, employee knowledge, and skills and other

idiosyncratic capabilities are difficult to separate or transfer.

Competence can be defined as an employees/organizations capability to

perform a specific task (Ivancevich, 2004). This definition recognizes that

competence is a precursor to public organizations viability and ability to

achieve public goals and objectives. According to Genevive, et al., (2001)

competence is simply a fitbetween an employee and the task. The focus on a

fit between an employee and a specific task can be useful when a public


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organization tries to hire someone or when it attempts to create an effective

training plan.

Gold, (2001) observes that the same organizational resources that have

historically provided public organizations with competencies can also create

competency traps when environmental conditions change. He notes that

competence traps may occur largely because of the general tendency of public

organizations to engage in exploitation (that is, the use and development of

things already known) at the expense of exploration(that is, the pursuit of new

knowledge) (Hansen, 2002). This is because the returns from exploiting existing

resources (knowledge, skills and information technology) are generally more

certain than those from exploration, the former often drives out the latter. Thus,

the very possession of valuable resources paradoxically leads resource-rich

organizations to focus on increasing attention on applying and improving them,

at the expense of exploring and developing the new resources which are often

required for strategic change (Argote & Ingram, 2000).

2.2.4.1 Training and Human Resource Capacity Building

Any framework for reshaping attitudes of public organization employees must

involve staff training and development. Amoako, (2003) observes that

traditionally, training programmes have had a skills-based focus, but recent

trends in customer-oriented Civil Service require an attitudinal-focused training.

This has led to the need for a pragmatic approach to training and development so


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as to develop the capacity of public servants for improved service delivery. The

government has to invest in public servants in order to: equip managers with the

necessary skills to handle new responsibilities; develop skills for customer

oriented Civil Service; improve the standards of service delivery; adapt to new

technologies and new working techniques (Amoako, 2003). The public service

plays a central role in enabling the achievement of development goals.

Governments should therefore continuously seek new and better ways to build

service institutions that have the capacity to champion and advance the course of

development (Amoako, 2003).

2.2.4.2 Combination of knowledge, Skills and Information Communication

Technology (ICT) Competence

Accessing information communication technology-borne data requires a whole

range of overt resources. These resources include a telecommunications

infrastructure to provide network access, an electrical infrastructure to make the

information communication technologies work and skills infrastructure to keep

all the technology working. In addition, money to buy or access the information

communication technologies, usage skills to use the information communication

technologies, and literacy skills to read the content are also required. Most

African countries simply do not have these resources. In a world where 80 per

cent of the population has no access to reliable telecommunication, and one-third

does not have access to electricity it is not a surprise that the introduction of e-

government and its various applications have been slow in Africa (Panos, 1998).

The global evolution of the information age and the worldwide technological

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