The adoption of performance-related pay schemes is part of the wider market-type reforms occurring in public services today. However, this ‘managerial revolution’ has prompted an academic debate for and against these practices. The main questions raised revolve around the novelty, objectivity and compatibility of such practices to which this study responds.
The thesis argues that the value of an incentive scheme policy is a function of the organisational environment, objectivity of performance measurement processes and perceived equity of the installed scheme. The research uses data from in-depth interviews, questionnaires, and desk research based on a case study of performance-related pay schemes in UK local authorities.
The evidence indicates a strong support at policy level for the use of market-type managerial reforms, but less support on the ground for the performance-pay thesis. There are difficulties encountered in the setting, measuring and rewarding qualitative performance of intangible targets such as intellectual capital. The evidence perceives PRP schemes to be vulnerable to failure as they are installed as ‘off-the-shelf’ ‘stand-alone’ rather than organization-specific motivational devices. The study looks at the ‘new’ role of management accounting systems in meeting ‘performance information needs’ of public sector managers as a potential area for further research.