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Why does performance pay de-motivate: financial incentives versus performance appraisal

By Stephen French, Katsuyuki Kubo and David Marsden

Abstract

The sheer scale and speed of the shift of payment system from time-based salaries to performance-related 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 employee motivation and work behaviour across the British public services. 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 demotivating effect arising from difficulties of measuring performance fairly. Organisational commitment appears to offset some of the negative effects of PRP

Topics: HB Economic Theory, HD Industries. Land use. Labor
Publisher: Japan Institute of Labour
Year: 2002
OAI identifier: oai:eprints.lse.ac.uk:4427
Provided by: LSE Research Online
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