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Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development
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Distortions in performance appraisals and employee perceptions of fairness in rewards and incentives and career development

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Analyzes the theroretical space surrounding employee performance appraisal in the context of selected US federal government agencies and arrives at interesting conclusions

Analyzes the theroretical space surrounding employee performance appraisal in the context of selected US federal government agencies and arrives at interesting conclusions

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  • 1. SHANTANU BASU Date: April 23, 2008 Distortions in Performance Appraisals and Employee Perceptions of Fairness in Rewards and Incentives and Career Development: Negative Fallout on Intrinsic Motivation? Abstract The failure of the performance appraisal system in government stems primarily from attitudinal problems on either side of the fence – employee and manager. The attempt to transpose private sector norms such as merit pay on a civil service system that had hitherto relied on intrinsic commitment to public service for its existence opened a Pandora’s Box and perhaps undid a large part of the old system, without substituting a workable new system. While governments have immersed themselves in attempts to figure out what went wrong with the system of extrinsic rewards, research too has primarily confined itself to the very same diagnosis instead of a prognosis and corrective measures. This paper hypothesizes that unless more objective and standardized performance appraisal systems are put in place, intrinsic motivators would continue to weigh heavily against extrinsic motivators. Further, extrinsic motivators without adequate transparency may even harm the intrinsic motivation of federal employees. Federal employeebased survey data from 2005-07 is used to test this hypothesis. Introduction Expectancy theory is an important basis of the performance/merit-based system, the four main pillars of which are effort, performance, result and reward. The theory posits that an individual is likely to change his/her behavior as a function of the strength of the desire to receive an award (or to avoid a punishment). Performance is likely to change by varying effort, and such a change would lead to the desired result. At the applied level this translates into rewards for good performance and penalties for poor performance. However, judging of performance is predicated on the fairness of the evaluation system apart from other psychological, economic and political factors. Over the last fifteen years several merit pay and other extrinsic motivation schemes have been evolved for government employees. However, the
  • 2. Basu 2 perception is that most of them failed for a bevy of reasons discussed below. The research questions therefore asked by the author are: Are public employees motivated more by intrinsic motivators or extrinsic motivators? Do extrinsic motivators impact the intrinsic motivation of public employees? Motivation versus Reward The fundamental assumption that pay is a critical element in fostering the motivation of public employees may not be entirely well founded (Lane and Wolf, 1990; Perry and Porter, 1982; Sherwood and Wechsler, 1986). Many organizational researchers have suggested that employee work motivation is related more closely with intrinsic rewards of the work than with the level of compensation earned (Herzberg, 1966; Hackman and Lawler, 1971; Hackman and Oldham 1980). These scholars stress the importance of employee participation and employee perceptions of the significance of their work. Though expectancy theory recognizes that people may differ substantially regarding what is important to them, merit pay systems do not take such differences into account. Lovrich’s study of Washington state employees showed that work place participation and job enrichment were the main determinants of motivation and job satisfaction. Lovrich (1987:66) found that little evidence existed to argue that pay concerns were primary in the minds of Washington state employees when it came to the consideration of workplace motivation. A similar conclusion was reached by Sherwood and Wechsler (1986) in their review of pay-for-performance schemes for senior public managers in the federal and state governments, and by Daley (1987) in an analysis of the federal Merit Pay System. Perry and Wise (1990) charged that the current trend of public motivation programs failed to acknowledge unique motives underlying public sector employment. They pointed out that public service motivation was commonly associated with normative orientations such as a desire to serve the public interest or social equity. Public organizations that attracted employees with high levels of public service motivation would not have to construct incentive systems that were predominantly utilitarian to energize and direct member behavior. (Perry & Wise, 1990: 371). Yet the overriding intrinsic motivation of a government employee is sought to be supplemented by extrinsic motivation in the form of rewards and incentives like merit pay. What confounding factors affect extrinsic motivation?
  • 3. Basu 3 Proposition I: Intrinsic motivation is a stronger driver for public employees than extrinsic rewards and incentives Psychological Factors: Employee Level Psychological factors affecting merit pay operate in an organization at two levels, viz. employee and manager. At the employee level, the merit pay system relies on the linkage between effort-performance and performance-outcome expectancies. However, there are major pitfalls in establishing these links that may not correspond to expectancy theory. For example, the theory assumes effort-performance expectancies, performance-outcome expectancies, and perceived value of the outcome to be independent that may not be the case. People may, for instance, place higher value on outcomes they believe are more difficult to achieve (Pinder, 1984). Furthermore, expectancy theory assumes that people are rational actors, but much of human behavior is habitual and subconscious rather than rational (Pinder, 1984). Halachmi and Holzer (1987) state that there is little empirical evidence to support the claim that the individual behavior represents not only a calculated effort but a conscious choice. It may also be the case that employees do not always think about the two expectancies or the value of probable outcomes. Halachmi and Holzer (1987) conclude that, given possible weaknesses of the underlying theory, incentive schemes such as merit pay may not produce the intended results, mainly on account of individual perceptual differences. Adding to the fallibility of these linkages is the relation of performance and evaluation. For employees to perceive a performance-outcome linkage in an organization, it must be visible and trustworthy (Lawler, 1981). In fact, a climate of trust within the organization can be critical. Golembiewski (1986) contends that the absence of this kind of organizational culture or climate will significantly inhibit the success of merit pay programs. Employees generally do not agree with their performance appraisals (Campbell & Lee, 1988; Meyer, 1980) and presumably do not accept the evaluations as accurate. Although the use of observable, objective criteria somewhat mitigates this problem, it does not eliminate it. As Fisher et al (1993) have noted factors beyond the individual’s control (e.g., the quality of a work machine) can affect even objective performance. The numbers are not in dispute; the causes for the numbers are. Additionally, a complex set of informational, cognitive, and affective constraints influence self evaluation, and these constraints make it extremely unlikely that individuals will agree with evaluations lower
  • 4. Basu 4 than their own (Campbell & Lee, 1988). While deliberate distortion may account for some of the disagreement, more fundamental factors (i.e., different cognitive schemas; defense mechanisms, etc.) also operate. Due to such disagreement, many employees simply do not see merit pay as truly rewarding performance (Hills et al., 1987; Kanter, 1987; Vest, Hills, & Scott, 1989). Proposition II: Extrinsic motivators require a transparent linkage between performance and outcome to be able to appeal to employees Psychological Factors: Managerial Level Insofar as managers are concerned, giving evaluative feedback is often anxiety-provoking for the appraiser, and managers are therefore uncomfortable with the whole feedback process. Several factors contribute to this. First, the typical feedback session is characterized by disagreement, making the normal session unpleasant. Second, the supervisor is trying to meld several distinct objectives by evaluating and rewarding past performance while attempting to develop and motivate future performance at the same time. This dual focus makes it difficult to accomplish either of the objectives well (Campbell et al, 134). Other psychological biases in raters (managers) include extraneous factors as well. Mark Cook quotes two separate studies that showed a strong link between physical attractiveness – rated on a five-point scale – and later salary level for nurses. Each extra scale point of rated attractiveness was “worth” $2,000-2,600 more in salary. This implied that the salary difference between the most and least attractive could be as great as $13,000.The effect was for males, in “male” jobs, and in older age groups. Appraisals were strongly biased by appearance, and the bias was not confined to young female ratees only. In fact it was probably strongest in traditional management circles (Cook, 3-4). Citing another example of such bias, Cook says that promotion in the Royal Navy of the 1890s went to officers with the most highly polished ships, which caused a few to behave as if they had forgotten what battleships were for; they avoided gunnery practice in case the powder smoke spoiled their paintwork (5) – a classic case of goal displacement. Thus subordinates who helped managers to feel proud of being a good manager, or helped to make them feel fulfilled, received better appraisals (4). Similarly, most work groups can be divided into an in-group, whose members enjoy the supervisor’s confidence and therefore are assigned the more challenging tasks, and an out-group, whose members are treated like “hired hands” and are assigned the mundane tasks. Research on
  • 5. Basu 5 bank staff shows that in-group members get better appraisals but do not perform any better on objective performance indices. This implies that the in-group members achieve their position by paths not necessarily related to better work (Cook, 4). Detailed interviews with managers who regularly carry out appraisals showed that three-quarters of them freely admitted that they allow personal likes to inflate appraisals and conversely, dislike to lower them (Cook, 4). The same report also states that 83% of managers say being in a good or bad mood shifts the appraisals they make – probably downwards in most cases, given that 73% said they hated having to appraise (Cook, 4). Cook also states that ingratiation and other impression management techniques also have an adverse bearing on appraisal ratings, and make them less accurate reflectors of an employee’s true worth to an organization. Apart from undermining performance appraisals, this affects employee morale, when employees who are good at ingratiating themselves, but, get merit awards, or promotion, or other marks of favor although their performance is relatively poor(5). Proposition III: Extraneous and personal biases of managers play an important negative role in determining the distribution of extrinsic motivators. Political & Economic Factors Control Mechanism: At the organizational level the continued use of merit pay in the public service is perceived as a control mechanism (Thayer, 1984; Gabris, 1986; Lovrich, 1987) associated with directing and coordinating organizational processes. Therefore any mechanism to facilitate the performance of such tasks enjoys support from management. Those who control the performance appraisal process also control the distribution of awards and, by implication, employee behavior. Thus merit pay and other incentives become a means of strengthening the organizational hierarchy and imposing greater control over employees by increasing the leverage available to management. In fact, a major conclusion of Gabris’ (1986) study was that supervisors support merit pay precisely because they believe it enhances their control over subordinates. Grievances: Klaas and DeNisi state that the treatment of employee grievances by managers is an important issue in performance appraisal motives. Given the importance of the categorization process in performance appraisal (DeNisi, Cafferty, & Meglino, 1984; Feldman, 1981), it is likely that grievances filed by an employee may cause him/her to be labeled a troublemaker, a
  • 6. Basu 6 categorization that will then be used as a framework for interpreting all other behavior the grievant exhibits. Moreover, research has suggested that a supervisor's attitude toward a ratee will have an effect on the processing of information about the ratee at the pre-recognition stage (Alexander & Wilkens, 1982; Cardy & Dobbins, 1986; Moreland & Zajonic, 1977; Wilson & Zajonic, 1980). If the filing and processing of a grievance influences a supervisor's attitude toward an employee, such change in attitude may result in unconscious bias, and thus, lower ratings for the grievant (705). Intentional Distortion of Ratings: Managers may also intentionally distort the ratings they assign to a grievant. Longenecker, Gioia, and Sims (1987) found that under certain conditions managers were willing to intentionally deflate the ratings assigned to particular employees (706). Conversely, in order to avoid conflict and maintain good relations with subordinates, many supervisors tend to inflate ratings (Lane and Wolf, 1990). Perry et al (1989) found that 99% of employees in the U.S. General Services Administration received ratings of “Fully Successful” or above; those employees were then eligible for merit increases. While pay increases in some parts of the federal service are still largely automatic just as in the days prior to the CSRA. In their study of a public sector organization, Klass and DeNisi found that as the number of grievances by an employee increased within a period, the evaluation assigned to that employee declined and as the number of positive outcomes from such grievances increased within a period, the evaluation assigned to that employee declined (711). They also found that the effects of grievance activity against supervisors may extend beyond the year in which a grievance is filed (712). Nongrievants' ratings remained essentially constant over the same period (713). Organizational Cheating: Considerations of physical survival and the need to avoid budget cuts and public and legislative disapprobation lead organizations to cheat on their appraisal data. In their study of public schools, Bohte and Meier concluded that cheating is likely to occur in organizations in which the day-to-day activities of bureaucrats are not heavily monitored (for example, highly decentralized bureaucracies) (180). Such a scenario often applies in human service bureaucracies—those dealing with problems such as social welfare, law enforcement, and education (Lipsky 1980; Keiser and Soss 1998). They stated that cheating is also likely to occur when program designs include incentive-based structures (180).
  • 7. Basu 7 Proposition IV: Incentives are used as organizational control mechanisms and compound existing managerial biases. Typology of Justice Erdogan states (556) that the taxonomy that is most often used to describe organizational justice is distributive and procedural justice (Cropanzano & Folger, 1991). More recently, interactional justice has been introduced as a third type of justice (Bies & Moag, 1986). Procedural justice refers to the fairness of procedures by which performance is evaluated. Even when the outcome of the appraisal is fair, procedures used to arrive at those outcomes may be unfair (Erdogan, 557). Interactional justice has been defined as the fairness of interpersonal treatment received during the execution of a procedure (Bies & Moag, 1986) and emphasizes the importance of truthfulness, respect, and justification as fairness criteria of interpersonal communication (Erdogan, 557). It may therefore be concluded that although the interaction of procedural and interactional justice impacts a performance appraisal, the perceptions of fairness are more conditioned by interactional justice that is more germane to the employee and defines the appraisal relationship between the manager and employee. Proposition V: Interactional justice is the basis of employee perceptions of managerial unfairness; the higher the perception of unfairness, the lower would be the value assigned to extrinsic motivators Fallout on Rewards and Incentives: The Example of Merit Pay Merit pay systems in the federal government introduced by the CSRA, 1978 have had a limited impact on productivity. Although expectancy theory seeks to establish a link between performance and outcomes, in practice, this has been difficult to achieve. Pearce and Perry (1983) stated that federal managers were less likely to believe that higher performance would lead to increased pay under the federal MPS program than they had been under the previous compensation system. In a similar vein, Gaertner and Gaertner (1984) found that few employees thought that merit pay would improve agency effectiveness. Similarly, Lovrich (1987) found that merit pay was not a salient determinant of Washington state employee motivation. Heneman and Young (1991) stated that public school administrators were largely unmotivated by merit pay and that the effort-performance and performance-outcome expectancies were low.
  • 8. Basu 8 A major reason is the absence of accurate and equitable system for evaluating performance is essential to increase the perceived probability that good performance will lead to rewards. In the public sector, however, goals and performance criteria are often diverse, conflicting, and difficult to measure (National Research Council, 1991;). Not surprisingly, Kellough showed that a perception of ineffectiveness of merit pay was all-pervasive across states and the federal government (50). The inability to distinguish between good and average performers stems from a variety of reasons, most of which fall in psychological, political and economic factors discussed supra. The lack of credibility may be exacerbated by the fact that supervisors are not well trained in evaluating subordinates (Mount, 1987; Sigel, 1987) and a supportive organizational culture/climate has not been developed (Golembiewski, 1986). The lack of uniform evaluation standards has added to the lack of credibility and deprived the system of trust by the employee. One study found that only 49% of federal employees surveyed agreed with the statement performance appraisal systems accurately rated “my job performance”. (Bann and Johnson, 1984). According to a report by the U.S. Merit Systems Protection Board (MSPB), 47% of federal employees surveyed lacked trust and confidence in their immediate supervisors (U.S. Merit Systems Protection Board, 1990). This has thus served to reduce organizational commitment for employees who received lower evaluations. Pearce and Porter (1986) found that organizational commitment decreased for those employees who received merely “Satisfactory” ratings. Merit pay programs in the public sector also frequently lack adequate funding (Pearce, 1989; Perry, 1988- 89, National Research Council, 1991; Siegel, 1987). The Merit Pay System established by the federal government in 1981, for example, could spend no more on merit pay than had been spent earlier under the previous general schedule system. According to Perry (1988-89), the requirement of budget neutrality was one factor that significantly damaged the prospect that noticeable improvements in agency performance could be achieved through merit pay. Budget constraints have also limited the release of merit pay on a wider scale. Mitra et al showed that increase below about 10% of base pay, perceptions of a linkage between performance and pay steadily weaken. Mitra et al thus concluded that the smaller the raise, the less likely that people will view it as dependent on performance and, consequently, the more likely that it may decrease their motivation (74-75). Rather the basic minimum percentage hike
  • 9. Basu 9 should be 6-7% with no distinction being made in percentages on the basis of base pay at any level (75). A survey of Georgia public employees after implementation of merit pay indicated that most employees felt that quotas on good performance ratings had been imposed, not enough state money had been available to reward good performers, their pay was not competitive with that of the private sector, and it was still hard to recruit qualified applicants. Few managers and nonsupervisory employees felt that merit pay was a good way to motivate employees. There was a sharp drop in satisfaction from before to after implementation of the system in virtually every area of the personnel system. Those saying that they were likely to leave their jobs within the next year increased rather than decreased (Nigro & Kellough, 2006). Pearce (1989: 402) observes, however, that financial constraints on pay-for-performance systems are nearly unavoidable because “the need to pay the market wage for each job and various requirements to maintain internal equity across departments and hierarchical levels results in proportionately small amounts retained for merit raises and bonuses”. In addition, the political environment of public organizations makes large pay increases difficult to achieve, especially in times of fiscal stress and mandatory budget reductions. Kellough says that the subjective nature of appraisals has increased discretion of managers (53). The National Research Council (1991, p. 31) has argued, for example, that “the managerial constraints and legalistic environment that have come to characterize federal management are antithetical to the managerial discretion necessary for effective pay-forperformance processes”. There is, in effect, a “tension between the principle of neutral competence and pay for performance” (National Research Council, 1991: 31). In the public sector, organizational missions and purposes are defined politically by executive and legislative action to minimize which civil service procedures based on merit principles, including neutral competence and employee protection from partisan manipulation. This complicates and calls into question the application of merit pay to middle and higher level positions in the civil service. Thus while merit pay systems required an autonomous environment for effective functioning, the civil service system with its concomitant political and financial pressures made for its failure.
  • 10. Basu 10 Proposition VI: Inadequate funding for incentives and political intervention has increased managerial discretion and employee perceptions of unfair appraisal and further compounded managerial biases. Research Design To recapitulate, the following propositions emerged from the above discussion:  Intrinsic motivation is a stronger driver for public employees than extrinsic rewards and incentives;  Extrinsic motivations require a transparent linkage between performance and outcome to be able to appeal to employees;  Extraneous and personal biases of managers play an important negative role in determining the distribution of extrinsic motivators;  Incentives used as organizational control mechanisms compound existing managerial biases;  Interactional justice is the basis of employee perceptions of managerial unfairness; the higher the perception of unfairness, the lower would be the value assigned to extrinsic motivators;  Inadequate funding for incentives and political intervention has increased managerial discretion and employee perceptions of unfair appraisal and further compounded managerial biases. Accordingly, the research design would have intrinsic and extrinsic motivation affecting the effectiveness of rewards and incentives; intrinsic motivation would have two control variables, viz. employee alignment with the organization and level of satisfaction while extrinsic motivation would have three control variables, viz. managerial biases, adequacy of funding for rewards and incentives (including merit pay) and employee perceptions of fairness of appraisals. Fig.1 is a diagrammatic representation of the research design.
  • 11. Basu 11 Effectiveness of Rewards and Incentives Intrinsic Motivation Employee Expectations Level of Employee Satisfaction Extrinsic Motivation Managerial Biases Adequacy of rewards Employee perceptions of fairness Fig. 1 (First level is dependent variable, 2nd level independent variables & 3rd control variables) The above research design would be tested on data for federal government employees from the Federal Human Capital Survey (FHCS), 2006, MSPB’s MPS 2005 and the Best Places to Work (BPW) Survey, 2007. The FHCS is an 84-item survey that includes 11 demographic questions and 73 items that measured Federal employees’ perceptions about how effectively agencies manage their workforces. The 84 items in the questionnaire are grouped into eight topic areas respondents see as they proceed through the survey: Personal Work Experiences; Recruitment, Development, and Retention; Performance Culture; Leadership; Learning (Knowledge Management); Job Satisfaction; Benefits; and Demographics. Employees were grouped into 875 sample subgroups corresponding to agency, subagency, and supervisory status reporting requirements. A total of 436,020 employees were randomly selected to participate in the survey with a response rate of 57%. The Best Places to Work (BPW) survey is carried out by The Partnership for Public Service and American University’s Institute for the Study of Public Policy Implementation and use data from the FHCS to rank agencies and subcomponents. Agencies and subcomponents are ranked on a BPW index score, which measures overall employee engagement. The BPW score is calculated both for the organization as a whole and
  • 12. Basu 12 also for specific demographic groups. In addition to this employee engagement rating, agencies and subcomponents are also scored in 10 workplace environment (“best in class”) categories such as effective leadership, employee skills/mission match and work/life balance. The BPW survey ranks 29 large, 31 medium and 222 subcomponents of agencies. The top five ranked organizations for being the best places to work in the federal government are Nuclear Regulatory Commission (NRC), Securities & Exchanges Commission (SEC), NASA, Departments of Justice (DoJ) and State (DoS) while the five lowest ranked in the same survey are National Record & Archives Administration (NARA), Departments of Transportation (DoT), Department of Education (DoEd) and Homeland Security (DHS) and Small Business Administration (SBA) in that order (the lowest five are not necessarily the worst places to work either). For the limited scope of this paper only these ten agencies from the BPW dataset would be analyzed. Intrinsic Motivation Table 1 summarizes FHCS data on the positive responses received. Positive responses have been reckoned to be the total of strongly agree and agree points on a 5-point Likert scale. This paper does not consider “Neither agree nor disagree” point valid for arriving at a positive or negative response since this would skew the interpretation of data. Table 1 Question The work I do is important I like the kind of work I do My work gives me a feeling of personal accomplishment. I have enough information to do my job well Considering everything, how satisfied are you with your job? I recommend my organization as a good place to work My talents are used well in the workplace Considering everything, how satisfied are you with your pay? I feel encouraged to come up with new and better ways of doing things Considering everything, how satisfied are you with your organization? How satisfied are you with the training you receive for your present job? How satisfied are you with the recognition you receive for doing a good job? How satisfied are you with the policies and practices of your senior leaders? How satisfied are you with your opportunity to get a better job in your organization? Average score for this group of questions Positive Responses (%age) FHCS 90.20 83.40 72.90 72.40 67.50 63.60 61.50 61.30 60.30 56.20 53.70 48.60 40.90 36.50 62.07
  • 13. Basu 13 It would be seen from Table 1 that on a rough average nearly two-thirds of employees have a high intrinsic motivation for public service and 90% think their work is important while about three-quarters of employees have a sense of personal accomplishment. Over two-third of employees are satisfied with their pay and jobs while about two-third would recommend their organization as a good place to work. At the same time, less than half are satisfied with the recognition they receive and even less by their perceptions of the abilities of their leaders. In fact when the latter two responses are considered the average score for this group of questions declines substantially. Data from the MPS 2005 showed that 95% employees felt that their agency’s mission was important to them (6) while 88% felt their work was meaningful to them (6) which is consistent with the FHCS data above. Over three quarter of employees would recommend their agency (11). However, training seems to be a sore point in both datasets as the MPS 2005 shows 48% employees speaking of inadequate training (16) and a mean 60% employees feeling that they are given a real opportunity to improve their skills in their organization which too is consistent with the FHCS data above. There is however, a major point of departure between the two datasets insofar as perceptions of leadership are concerned. While the FHCS data shows only 41% employees satisfied with the policies and practices of their leaders, the MPS 2005 data shows 63-71% satisfaction in the “Overall, I am satisfied with my supervisor” responses and 45-57 in the “Overall, I am satisfied with the managers above my immediate supervisor” responses. It would thus seem that disenchantment with senior leadership is higher than with immediate supervisors. The inherent strength of intrinsic factors also shows if the top five and bottom five organizations listed in the BPW, 2007 are compared for matching employee skills and mission. Organization Overall BPW Rank NRC SEC* NASA DoJ DoS NARA DoT DoE DHS SBA TABLE 2 BPW/Employee Skills/Mission Match Rank 1 8 4 5 9 19 23 27 29 26 BPW/Teamwork Rank 1 10 2 18 4 28 25 26 29 22 * SEC has been moved up from third to second place since GAO data is NA for 2nd place
  • 14. Basu 14 The link between employee skills and mission match and teamwork, all key ingredients of intrinsic motivation, is abundantly clear from the above table. Only in the case of DoJ there is an apparent disconnect between employees and leadership that manifests itself in poor teamwork that lowers the quality of intrinsic motivation. For the low ranked organizations all three parameters are proportionately low making for relatively lowly motivated organizations. The data ties in with the findings of the literature review that states that intrinsic motivation is the strongest driver for public servants. It is evident that public employees are intrinsically motivated for public service and take pride in their work and work place. Most of them are satisfied with their jobs and the scope of doing well at their present jobs provided more skills training is imparted to them. They also work well as teams showing that each member of a team is generally intrinsically motivated. Thus the basic motivator of a public employee is intrinsic, rather than extrinsic. However, it may be stated that the trends in the dataset have been viewed as a combination of agencies and agency level differences may be wide in some cases. At the same time, there appears to have been a perceived need for extrinsic motivators to encourage employees to use their knowledge and skills more strongly for the agency. Does extrinsic motivation harm intrinsic motivation by creating perceptions of unfairness among committed public servants and thereby act as a demoralizing agent? Extrinsic Motivation Extrinsic motivation is provided by organizations in the shape of promotions, rewards and incentives, including, but not limited to, merit pay. Table 3 shows the relative overall BPW score of the ten agencies chosen on the basis of their overall score as the top and lowest five best places to work in the federal government. Table 3 The Top Five The Bottom Five Department BPW (%) Department BPW (%) (A) (B) (C) (D) NRC 76.2 NARA 54.9 SEC* 71.9 DoT 52.9 NASA 69.7 DoE 52.1 DoJ 69.0 DHS 49.8 DoS 67.9 SBA 43.4 Average 70.94 Average 50.62 Diff. (B-D) 21.3 19.0 17.6 19.2 24.5 20.32 * GAO that is ranked top second has not been considered since complete data is not available and SEC has been moved up from third to second place
  • 15. Basu 15 It would be seen that there is a 33% difference in overall BPW score between the top ranked and last ranked agency in the survey with an average difference of about 20% between the top and bottom five ranked agencies in overall rankings. It would be therefore worthwhile to analyze the FHCS data on reactions to such extrinsic motivators, starting with Table 4 that shows perceptions of employees with regard to their own/group work, interaction with immediate managers, etc. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Table 4 Question Positive Responses (%age) How would you rate the overall quality of work done by your work group? 83.00 I am held accountable for achieving results 79.10 Overall, how good a job do you feel is being done by your immediate 66.20 supervisor/team leader? My performance appraisal is a fair reflection of my performance. 64.40 I have trust and confidence in my supervisor 63.80 Prohibited Personnel Practices are not tolerated. 58.90 Discussions with my supervisor/team leader about my performance are 55.90 worthwhile I have a high level of respect for my organization's senior leaders. 49.20 My organization's leaders maintain high standards of honesty and integrity. 48.70 I can disclose a suspected violation of any law, rule or regulation without fear 48.00 of reprisal I have sufficient resources (for example, people, materials, budget) to get my 47.60 job done Arbitrary action, personal favoritism and coercion for partisan political 45.20 purposes are not tolerated Employees are rewarded for providing high quality products and services to 44.60 customers Employees have a feeling of personal empowerment with respect to work 42.20 processes Awards in my work unit depend on how well employees perform their jobs 39.80 Complaints, disputes or grievances are resolved fairly in my work unit 39.40 Creativity and innovation are rewarded 38.90 In my organization, leaders generate high levels of motivation and 37.80 commitment in the workforce Promotions in my work unit are based on merit 33.60 In my work unit, differences in performance are recognized in a meaningful 29.70 way In my work unit, steps are taken to deal with a poor performer who cannot or 28.60 will not improve Pay raises depend on how well employees perform their jobs 21.70 Average score for this group of questions 48.47
  • 16. Basu 16 It would be seen from Tables 1 & 4 that there is a positive difference of about 14% in the average quality of perception of employees insofar as in favor of intrinsic motivation. It would appear from responses to question nos. 1-7 that employees are accountable for their jobs and hold their immediate managers in good esteem. However, responses to question nos. 8-22 speak of low esteem for senior management that controls incentives and rewards and the pronounced managerial biases on which these incentives are awarded to employees. The data also agrees with the findings of the BPW survey, 2007 as shown in Table 5. Table 5 Organization BPW/Performance Rewards & Advancement BPW/Effective Leadership Rank NRC 1 1 SEC* 8 6 NASA 2 2 DoJ 18 9 DoS 3 3 NARA 16 21 DoT 28 27 DoE 26 25 DHS 29 29 SBA 25 28 * GAO that is ranked top second has not been considered since complete data is not available and SEC has been moved up from third to second place. Disconnect between leadership and performance rewards in the DoJ points to managerial bias in distribution, or budget constraints for the organizations’ relatively low rating on performance rewards. The impression one gathers is that of an ossified senior bureaucracy that is not far different from many other countries similarly placed for the five lowest ranked organizations. The data also principally is consistent with the types of managerial biases that have been mentioned in the literature review elsewhere in this paper. Like intrinsic motivators, large agency level differences are perceptible for which reason this paper would now analyze the top five and bottom five agencies ranked in the BPW survey 2007. At the same time, the Nuclear Regulatory Commission’s (NRC) Employee Survey, 2007 shows that though 70% of employees believed that their performance appraisals were fair, yet 30% believed that pay raises were based upon performance (5). While, on the one hand majority employees expressed their faith in their managers, yet less than half (49%) believed that differences in performance were recognized in a meaningful way. At the same time 79% were satisfied with their job – a pointer to intrinsic motivation being more important. At the same time
  • 17. Basu 17 NASA’s agencies varied in their BPW response on fairness of rewards from 57.6% for HQs to 78.3% for the Kennedy Space Center. Similarly, units under the Department of Commerce had BPW ratings ranging from 52.7% to 71.7%. For the DHS the BPW was a low of 32.7% but ranged upward to 70.4% when all its sub-agencies were considered independently. Similarly, the Department of Education had an overall BPW of 38.4% but ranged up to 57% including all its agencies. The Department of Transportation with an overall BPW of 35.2% ranged up to 71.9% when the Federal Highway Administration’s data was factored in. The fact of the HQs of these departments exhibiting such low favorable responses toward rewards points either to higher intrinsic motivation at the policy making and management level or else, at the other extreme, to severe nepotism in the distribution of rewards or even inadequate budget support for reward schemes. However, the FHCS shows that across all the surveyed federal departments, only slightly above a third (39%) of employees felt that they were rewarded for creativity and innovation, a fifth (22%) felt that pay raises were related to performance, 40% believed that awards were related to performance and less than a third (30%) felt that differences in performance were recognized in a meaningful way. Thirty nine per cent felt that grievances were resolved fairly, 45% felt that arbitrary action was not tolerated and 48% believed that violation of a law could be reported without reprisals. Even in these categories it is evident that more than half of all employees believed that arbitrariness and reprisals were more the norm than the exception. Adverse reactions to the quality of leadership also manifested themselves in a low 41% approval of leader’s practices and policies while 64% trusted their managers. Surprisingly, five key BPW measures – reward for creativity/innovation, promotions, rewards related to performance, dealing with poor performers and fair pay raises ranked 64-84 on the 84-positive response list in the FHCS with performance related pay coming in at 83rd position – indicator of the abject failure of the merit pay system. There is also a difference in BPW scores between headquarters and field offices within organizations which shows that there are differences in the extent to which managerial biases in performance appraisal occurs at various levels within an organization as shown in Table 6:
  • 18. Basu 18 Table 6 Issue I have trust and confidence in my supervisor Promotions in my work unit are based on merit Employees are rewarded for providing high quality products and services to customers Creativity and innovation are rewarded Pay raises depend on how well employees perform their jobs Awards in my work unit depend on how well employees perform their jobs In my work unit, differences in performance are recognized in a meaningful way My organization's leaders maintain high standards of honesty and integrity Average HQs 65.70% 36.30% Field 62.90% 32.30% 48.90% 42.70% 25.00% 42.10% 42.70% 37.20% 20.10% 38.60% 32.20% 53.20% 43.26% 28.50% 46.60% 38.61% Part of the reason for the mismatch may lie in the fact that while participants generally trust their immediate supervisor to assess their performance and contributions (71%), fewer participants understood how the supervisor would rate their performance (63%), actually believed their supervisor rated their performance fairly and accurately (62%), and that their supervisor was held accountable for rating employee performance fairly and accurately (48%). Finally, a slender majority trusted their supervisor to support them in pay and award discussions with upper management (58%) – indicative perhaps of the control of top management over supervisors. In a pay for performance system, upper management generally has a role in determining pay increases, although the extent of this influence on individual pay raises varies widely. MPS 2005 survey data indicates that not even half of participants trusted upper management to fairly assess their performance and contributions (49%) and refrain from favoritism (42%) in management decisions. While many participants were not satisfied with the size of the award (57%), many others were concerned with intangible aspects of the award or recognition—that it was not given effectively (59%) or in a timely manner (48%). Two-thirds of participants reported dissatisfaction with the way recognition and awards were distributed among their coworkers— for instance, other employees received underserved recognition (75%) or that deserving employees were left unrecognized (75%). More employees were dissatisfied with the recognition and awards they received for their work with only over a third (39%) of the participants being satisfied. Similar perceptions existed for both supervisors and non-supervisors; non-supervisors were less satisfied with both pay
  • 19. Basu 19 (59%) and recognition and awards (37%) than supervisors (70% and 50%, respectively). Overall, fewer than half of supervisors believed their agency had the resources to reward high performers (47%), and a slightly lower percent said they had the authority to actually draw on these resources to reward high performance (43%). Thirty five per cent of supervisors and 43% of nonsupervisors said they would leave their agency on ground of unfairness and harassment – a pointer to the prevalent strong managerial biases and employee perceptions of unfairness. That funding for incentives also conditions employee disenchantment with extrinsic rewards is evident from the MPS 2005 survey where 14 of the 24 agencies surveyed were perceived by 50% of employees to have inadequate resources to pay rewards. This becomes more apparent when one considers the fact of 57-67% of the Senior Executive Service (SES) having received some form of reward during 2003-06 with some departments like Agency for International Development (USAID) having raised the number of rewardees by as much as 42% in a single year (OPM Table 4, 2006). This has naturally had fallout on the average amount of rewards that ranged from 8.4-9.3% at “Outstanding” level, 3.3-5.4% at “Exceeds Expectations” level and 0-1.6% at “Fully Successful” level, instead of a minimum 6-7% across the board as suggested by Mitra, et al elsewhere in this paper. Discussion It is evident that extrinsic motivators are increasingly being seen as measures of control even when employees are largely committed to their work and are reporting satisfactory performance. That extrinsic rewards and incentives have been imposed on organizations by the top management without much regard for performance appraisal systems is borne out by the relatively poor ratings of senior management. Senior management is also seen by employees pressuring supervisors into adopting extraneous considerations while distributing rewards and incentives that perhaps explain why employees perceive the supervisor in a better light when controlled for in intrinsic motivation; the perception of unfairness increases if controlled by extrinsic motivators. The low rating of senior management also appears to affect the intrinsic motivation of employees. Thus, DHS with an employee-skills match had a rating of over 71%, and teamwork of 63%; yet effective leadership and performance-based rewards rated at 40% and 33% respectively. On the contrary, NASA reported employee-skills match rating of over 80% and team work of 78%; yet effective leadership and performance-based rewards were rated at
  • 20. Basu 20 62% and 58% respectively – a pointer to the limitations of a faulty and subjective appraisal process. The fact of extrinsic motivators figuring at the bottom of the list of fairness related questions in all the surveys also shows that extrinsic motivators may harm the extant intrinsic motivation by wanton discrimination between employees on extraneous grounds. Even in organizations like NRC and NASA that were the two best places to work in the federal government have relatively high perceptions of unfairness with regard to the distribution of rewards and incentives. On the contrary, both these organizations have nearly three-quarters of their employees voting them the best and second best places to work. This may be due mainly to intrinsic motivation and commitment to the agency. Size of the organization (by employees) did not seem to matter to perceptions of unfairness for appraisals and rewards and incentives since the top five ranked agencies had employee strengths ranging from 3,000-102,000 while the five lowest ranked agencies had 2,500-128,000 employees. Evidently, extrinsic rewards harm intrinsic motivators and are even antithetical to the latter unless employees perceptions of fairness in the distribution of rewards and incentives is raised and more objective and uniform appraisal systems are put into place. Directions for Future Research Future research should be directed to designing new appraisal systems rather than pontificating at length only upon the causes for the limited success of appraisals and the distribution of rewards and incentives on this basis. While imposing an essentially private sector concept upon public agencies may prove difficult primarily on account of the existing civil service system, particularly in the federal government, yet the number of posts being changed over to an unclassified system may require more extrinsic incentives to be built into the system than at present. This may compensate the loss of job security and encourage enterprise and innovation. At the same time research needs to focus on systems that would assure adequate, although hitherto unconventional, adequate funding for rewards and incentives, perhaps as a trade-off between a permanent and classified civil service and the need to maintain efficiency, economy and effectiveness of governance with an unclassified system. Finally, research also needs to be directed to training and development of managers for carrying out of appraisals and also for measures geared to assure higher levels of managerial accountability.
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