Performance‐Related Pay and the Crowding Out of Motivation in the Public Sector: A Randomized Field Experiment

• Author: Nicola Bellé
• Date: 01 March 2015
• Published date: 01 March 2015
• DOI: http://doi.org/10.1111/puar.12313

Nicola Bellé is assistant professor in the

Department of Policy Analysis and Public

Management at Bocconi University in Milan,

Italy. His research focuses on work motiva-

tion, public employee attitudes, job design,

and leadership.

E-mail: nicola.belle@unibocconi.it

230 Public Administration Review • March | April 2015

Public Administration Review,

Vol. 75, Iss. 2, pp. 230–241. © 2015 by

The American Society for Public Administration.

DOI: 10.1111/puar.12313.

Nicola Bellé

Bocconi University, Italy

Abstract:  is article advances our understanding of the ef‌f ects of monetary rewards on public employee

performance and of the contingencies that may moderate these ef‌f ects. In a randomized control-group experiment

with nurses working at a local health authority in Italy, performance-related pay (PRP) had a larger ef‌f ect on task

performance when the rewards were kept secret than when they were disclosed.  e negative interaction between

PRP and visibility was stronger among participants who were exposed to direct contact with a benef‌i ciary of their

ef‌f orts, which heightened their perception of making a positive dif‌f erence in other people’s lives.  ese results are

consistent with theoretical predictions that monetary incentives for activities with a prosocial impact may crowd

out employee image motivation.  ere were no crowding-out ef‌f ects when a symbolic reward was substituted for

the monetary incentive.

Practitioner Points

• For activities with a prosocial impact, monetary incentives tend to have a larger performance ef‌f ect when

they are secret rather than disclosed.

• Nonmonetary rewards may be immune—or at least less prone—to some of the motivational drawbacks

encountered when using monetary incentives for activities with a prosocial impact.

• Public organizations and their managers should take full advantage of nonmonetary incentive options in this

time of budget restraints, which make it impossible to of‌f er bonuses that are large enough to be ef‌f ective.

moderate the ef‌f ectiveness of performance-related

pay systems” (Perry, Engbers, and Jun 2009, 44), and

this review identif‌i es only occasional PRP successes,

which appear to be associated with particular types

of public service industries and certain organizational

levels. In particular, the few positive studies tend to be

concentrated in the medical context and involve lower

organizational levels.

Unfortunately, the literature on the ef‌f ectiveness of

contingent pay plans in the public sector is sparse

and relies primarily on correlational designs, which

are well suited for testing theoretical predictions in

a broad range of populations but do not perform

particularly well with respect to their internal validity

(McGrath 1981).  e absence of sound experimental

research has precluded rigor-

ous causal inferences about the

ef‌f ects of monetary rewards on

public employee motivation

and performance and about the

contingencies that may moder-

ate these ef‌f ects. Filling this gap

in the literature seems particu-

larly important because of the

Performance-Related Pay and the Crowding

Out of Motivation in the Public Sector:

A Randomized Field Experiment

“More pay for better performance” has long been

the mantra behind the public sector personnel

reforms inspired by New Public Management. Since

the late 1970s, the vast majority of countries in

the Organisation for Economic Co-operation and

Development have adopted performance-related pay

(PRP) provisions for government employees (Lah

and Perry 2008; OECD 2005).  e use of monetary

incentives in the public sector does not seem to be

declining; on the contrary, it seems to have enjoyed

a recent resurgence in interest and popularity (Bellé

and Cantarelli 2014; Bellé and Ongaro 2014; Perry,

Engbers, and Jun 2009).

PRP continues to be adopted by public jurisdictions,

although research on its ef‌f ectiveness in the public

sector is inconclusive (Bellé

2010; Ingraham 1993; Kellough

and Lu 1993; Milkovich and

Wigdor 1991; Perry 1986). In

fact, the most recent compre-

hensive review of studies on

this topic reports mixed results

and suggests that “a variety of

contextual factors appear to

 e absence of sound

experimental research has

precluded rigorous causal infer-

ences about the ef‌f ects of mone-

tary rewards on public employee

motivation and performance.