Although governments have experimented with NPM in many different areas, one of its most prominent applications has been in the area of civil service reform. Civil services around the world came under scrutiny, especially in the 1980s, for being bloated (in Western Europe, especially Scandinavia), for wage bills that were perceived as too large (in developing nations) and for being unresponsive (United States). One of the solutions that NPM offered to reform civil services was the introduction of performance pay schemes. In this chapter we provide an introduction to comparative performance pay. We present five propositions to summarize the existing literature about performance pay.
When performance pay plans are put into practice they typically involve a process that can be simplistically represented by the following model: