The Challenge of Making Performance-Based Pay Systems Work in the Public Sector

Abstract

The federal government has successfully experimented with a variety of performance-based pay (PBP) systems for more than 30 years. However, the first large-scale expansion of PBP to civilians in the Department of Defense, through the National Security Personnel System (NSPS) and its subsequent repeal by Congress, have resulted in a setback for PBP and renewed debate over the merits of merit pay in the federal government. This article reviews theory related to PBP and documents historical results of PFP projects in the federal government. Longitudinal survey results from five major PBP demonstration projects and NSPS are compared on key concepts and analyzed by demographic subgroups. Hofstede’s cultural dimension of individualism–collectivism is used to explain reasons for ongoing resistance to PBP, especially from labor unions.