Organizational Control Systems and Pay-for-Performance in the Public Service

Abstract

Under certain conditions, output related performance measurement and pay-for-performance produce negative outcomes. We argue that in public service, these negative effects are stronger than in the private sector. We combine Behavioural Economics and Management Control Theory to determine under which conditions this is the case. We suggest as alternatives to the dominant output related pay-for-performance systems selection and socialization, exploratory use of output performance measures, and awards.