For decades, developing country governments have been introducing numerous strategies to improve public sector performance with mixed results.
Research is finally beginning to catch up by rigorously testing some of the latest public sector reforms to gain a more solid understanding of what approaches work in different contexts.
There is now some clear evidence that performance-based incentives, both monetary and non-monetary, can positively impact public sector performance – and the key lies in designing and implementing them well. Incentives should be tied to clear, measurable targets that meaningfully capture the desired outcomes, with care to avoid unintended consequences like shifting effort away from other important tasks not linked to incentives. Exploring politically feasible strategies to introduce merit-based reforms that may require some punishing or firing of under performers – rather than only focusing on the reward side – is an important related challenge.
It is also critically important to hire the right people from the start. In fact, focusing on new recruits may be a more effective strategy than trying to reverse the under performance of existing workers. Offering attractive performance-based incentives may help to draw in the right candidates, feeding a virtuous circle.
Finally, the long-term challenge for public sector organisations is not simply to attract more competent and motivated staff but also to begin changing institutional environments. Building institutional cultures that discourage corruption and promote sustained professionalism should help to ensure that good staff can be retained and continue to be motivated to perform well over time.
To conclude, some key points for policymakers include:
- Financial incentives linked to performance can help to attract better qualified staff and motivate better outcomes in the public sector.
- Performance incentives should be salient, simple, and based on desired targets that are clear and measurable.
- Be careful to avoid the risks – incentives can sometimes reward undesired behaviour or shift attention away from other important tasks not linked to incentives.
- Consider using non-financial incentives such as social rewards and performance-based postings and promotions, which can be both cheaper and more effective than cash incentives.
- Pilot-test, evaluate, and as needed adjust incentive schemes continually to ensure they achieve the intended goals.
- Effective, transparent advertising and selection processes are important for attracting qualified and motivated candidates to government jobs.
FURTHER QUESTIONS FOR RESEARCH AND POLICY
- How can incentive designs provide the right level of flexibility? How can workers be given more autonomy and discretion in ways that motivate good performance rather than inviting corruption and worse outcomes?
- What strategies can minimise the risk of financial incentives having unintended perverse consequences?
- What are innovative and cost-effective ways to motivate better performance using non-financial incentives such as leveraging social pressures
- How can governments use improved, more open strategies for advertising and filling job openings in order to attract more qualified candidates?
- How can governments foster institutional cultures of diligence, pride and professionalism to promote productivity?
- How can data and technology be leveraged to support better public sector performance?