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Does performance pay de-motivate, and does it matter?

French, Stephen, Kubo, Katsuyuki and Marsden, David (2001) Does performance pay de-motivate, and does it matter? 503. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

The sheer scale and speed of the shift of payment system from time-based salaries to performancerelated pay, PRP, in the British public services provides a unique opportunity to test the effects of incentive pay schemes. This study is based on the first large scale survey designed to measure the effects of performance related pay on a) employee motivation and work behaviour across the British public services; and b) workplace performance. The latter uses an index of organisational performance based on line-manager judgements. While there is evidence of a clear incentive effect for those gaining above average PRP, it is likely that it is offset by a more widespread de-motivating effect arising from difficulties of measuring and evaluating performance fairly. These motivational outcomes are found to affect workplace performance. Organisational commitment appears to offset some of the negative effects of PRP. In contrast to the many studies of top executives, sales and sports personnel, our study examines PRP for large numbers of ordinary employees.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2001 David Marsden, Stephen French and Katsuyuki Kubo
Library of Congress subject classification: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System: J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J33 - Compensation Packages; Payment Methods
M - Business Administration and Business Economics; Marketing; Accounting > M1 - Business Administration > M12 - Personnel Management
J - Labor and Demographic Economics > J4 - Particular Labor Markets > J45 - Public Sector Labor Markets
Sets: Research centres and groups > Employment Relations and Organisational Behaviour Group
Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 503
Date Deposited: 29 Feb 2008
URL: http://eprints.lse.ac.uk/3637/

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