organizations toward greater effectiveness in achieving their goals. We offer three broad suggestions to help in this matter.
For performance pay plans to be effective, the implementation of the plans must follow the logic dictated by theory. We return briefly to our simple model:
Goal setting Performance Appraisal
of performance -4 Reward decision
Expectancy theory tells us that rational employ¬ees will understand the linkage expressed in the model — positive results in performance and appraisal will lead to rewards. indeed, we have witnessed this behavior in field settings. There¬fore, public managers must be certain- that improved performance leads to positive appraisals and yields pecuniary rewards. If this practical application of the theory does not take place employees are likely to quickly lose faith in the logic behind performance pay, their management and possibly the organization in which they work.
Although data are limited, there are examples of both effective and ineffective performance pay plans within the OECD countries. The OECD (1993) reports that 61 per cent of the employees covered by the US Navy's China Lake demonstration project believed there was a connection between pay and performance. Other significant findings have emerged from public sector performance pay projects. Schay (1997) states that federal government employee satis¬faction with pay was much higher for those covered under the Pacer Share and Navy demon¬stration projects than for their colleagues in traditional pay plans.' There have also been failures. The OECD (1993) notes that public managers in Australia and Canada exhibited little confidence that pay was connected to per¬formance, although both of these countries used quota systems that restricted the amount of rewards that could be distributed. Therefore, the negative results in these projects could have more to do with the rules attached to the opera¬tion of the performance pay plans and less to do with the logic of performance pay.
Information is a precious resource in perfor-mance pay plans. In addition to the crucial role that information plays in performance appraisals, which we mentioned earlier in the chapter, information also allows all actors in the performance pay plan to take advantage of the plan. Furthermore, when information about payouts and other aspects of the operation of performance pay plans is thoroughly dissemi¬nated by management it has the potential to preemptively counter mistrust by employees.
Ingraham (1993) supports the first of these
organizations toward greater effectiveness in achieving their goals. We offer three broad suggestions to help in this matter.
For performance pay plans to be effective, the implementation of the plans must follow the logic dictated by theory. We return briefly to our simple model:
Goal setting Performance Appraisal
of performance -4 Reward decision
Expectancy theory tells us that rational employ¬ees will understand the linkage expressed in the model — positive results in performance and appraisal will lead to rewards. indeed, we have witnessed this behavior in field settings. There¬fore, public managers must be certain- that improved performance leads to positive appraisals and yields pecuniary rewards. If this practical application of the theory does not take place employees are likely to quickly lose faith in the logic behind performance pay, their management and possibly the organization in which they work.
Although data are limited, there are examples of both effective and ineffective performance pay plans within the OECD countries. The OECD (1993) reports that 61 per cent of the employees covered by the US Navy's China Lake demonstration project believed there was a connection between pay and performance. Other significant findings have emerged from public sector performance pay projects. Schay (1997) states that federal government employee satis¬faction with pay was much higher for those covered under the Pacer Share and Navy demon¬stration projects than for their colleagues in traditional pay plans.' There have also been failures. The OECD (1993) notes that public managers in Australia and Canada exhibited little confidence that pay was connected to per¬formance, although both of these countries used quota systems that restricted the amount of rewards that could be distributed. Therefore, the negative results in these projects could have more to do with the rules attached to the opera¬tion of the performance pay plans and less to do with the logic of performance pay.
Information is a precious resource in perfor-mance pay plans. In addition to the crucial role that information plays in performance appraisals, which we mentioned earlier in the chapter, information also allows all actors in the performance pay plan to take advantage of the plan. Furthermore, when information about payouts and other aspects of the operation of performance pay plans is thoroughly dissemi¬nated by management it has the potential to preemptively counter mistrust by employees.
Ingraham (1993) supports the first of these
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