uniformly awarded the same rating during each evaluation period, a mark that allowed them to receive a small raise in pay, but not one that would drive the employees to work considerably harder. The uniform marks were not guaranteed by the system itself, but had become a norm instituted by managers. Very few, if any, employees received a negative evaluation that would have led to no increase in pay. Due to this norm of range restriction, the old system contained significant measurement error.
The implementation of the new performance pay system evoked some ill will toward management at the facility. The same .reviews that employees took for granted some months earlier were no longer guaranteed to them. In short, the employees missed the restriction in range feature of the old system because it offered them a way to eliminate uncertainty in their evaluations. Although the new system offered the possibility of greater rewards, it also removed the restriction in range feature of the old system. Although this innovation was a step forward for management, some employees now feared they would be inappropriately rated.
One of the lessons we have learned from this and other research (Perry, 1995), and one that we believe can be generalized, involves the inevitability of measurement problems. There are three primary factors at work that will keep the designers of performance pay plans- busy for years to come. First, managers will constantly be challenged to design and improve systems that seek to measure tasks that often have intangible or even invisible results. Second, designers will need to write rules to guard against the tendency for systems to slip toward a comfortable but restricted pay range for all employees. Third, employees will remain averse to performance pay plans that involve inherent uncertainty, so designers and managers will need to engage in strong leadership and effective communication to inform and motivate their employees.
Proposition V: Despite some failures, performance pay plans represent an effective tool for the public sector
In lieu of conclusions, we would like to close with a note about the effectiveness of perfor-mance pay in the public sector. Much of this chapter has been devoted to both the theoretical and practical shortcomings of performance pay plans. Despite the negative evidence, we believe thai when adopted under the proper con¬ditions, performance pay can help lead public