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Daya Manusia
Kelompok 5:
THE DEVELOPMENT OF A ORGANIZATIONAL
MODEL FOR THE CONTROL SYSTEMS AND
DISTRIBUTION OF MERIT PAY PAY-FOR-PERFORMANCE IN
INCREASE MONIES FOR THE PUBLIC SERVICE
MUNICIPAL AGENCIES:
WRITTEN BY:
WRITTEN BY.
WILLIAN R. MCKINNEY, MICHAEL A. MULVANEY, AND
RICHARD GRODSKY BRUNO S. FREY, FABIAN HOMBERG, AND MARGIT
OSTERLOH
INTRODUCTION

Assumes;
Gerhart & Rynes, 2003
Many diciplines suggests that :

Pay for Increase

Performance INCREASE
Motivation and
system Productivity
ECONOMISTS SOCIAL PSYCHOLOGISTS
(ZENGER, 1992) (MITRA, GUPTA & JENKINS, 1997)

Upgrade
Attract Work
Talent Quality

Motivate Enhance
Effort Effort

Performance Performance
contingent Based Pay
reward
DEFICIENT PAY FOR PERFORMANCE SYSTEM (DOLAN, 1996)

The Performance Measure are unclear or not job specific

Supervisors may be inadequately trained in the art of evaluating
employee performance
The incentive value of the reward offered may be too low
The link between performance levels and rewards may be weak
or unnoticeable
The agency failed to address the issue of red lining
Teoritical Framework
Training

Selection
SHRM Appraisal

Reward
(Buller, Ferris & Napier, 1991)
(Fombrum,Tichy & Devanna, 1984)
 (Wright, McMahan,
1992)

Approach to Assess the 2 Types of Reactions:

effectiveness of an agency’s
performance appraisal system 1. Satisfaction with the
and merit pay increase overall appraisal system
decisions is through the 2. The distributive justice of
the distribution model
examination of employee
reactions.
 THE PURPOSE OF THE STUDY??

1. What are steps involved in developing a model for

the distribution of merit pay increases for a public
park and reaction agency?
2. Did employees attitudes toward the newly
developed pay for performance appraisal system
change when compared whit previous pay for
performance appraisal system?
3. Did employee perceptions of the distributive
justice toward the newly developed pay
performance system change when compared with
the previous appraisal system?
Method
Case Study Site The Elmhurst Park District:

 Perform performance appraisal annually

 Performance appraisal instruments:
1. evaluated the employee’s skills/capabilities that affected their performance
2. asked the supervisor to identify the level that best represented the
employee’s overall performance for the year
3 Models for the distribution of merit salary pay increases:
1.Pay Differentials
2.Forced Distribution
3.Pay Adjustment Matrices
1. PAY DIFFERENTIALS = The varying levels of merit increases that
base on an employee’s job performance (Milkovich et al, 2013)

JND (Just Noticeable Differences) Concept. = the minimum pay

increases that employees will perceive as making a meaningful change
in compensation and serve to enhance employee motivation to
improve job performance (Heneman & Ellis, 1982).
2. FORCED DISTIBUTION

Plots employee performance scores along a distribution curve

3. Pay adjustment Matrices

Consists of two dimention:

1. The employee’s current position
in the pay range
2. The employee’s performance
rating
(Martocchio, 2012)
Result
Three step pay for performance:

1. Definision of job performance  instrument to describe different level of

job performance
2. A well defined appraisal interview process
3. The determination of how much merit increase will be given for different
levels of performance.
(Milkovich et al, 2013)
Merit Pay increase distribution model:

1. Pay Differentials
2. Forced distribution
3. Pay adjustment matrices
CONCLUSION
 ORGANIZATIONAL CONTROL SYSTEMS AND PAY-
FOR-PERFORMANCE IN THE PUBLIC SERVICE
Written by.
Bruno S. Frey, Fabian Homberg, and Margit Osterloh

PROBLEMS
PROBLEMS

1. The Lack of an adequate theoretical underpinning of NPM

2. There’s no systematic review on the efficacy of pay for performance
initiatives in the public sector
3. There’s little research focusing on public sector organizations that
investigates the alignment of task to the control and reward system
CONTRIBUTION

1. We ask what might be an adequate theoretical underpainning of control systems

in NPM
2. We offer a systematic review of the main issues surrounding the debae on the
efficacy of pay for performance in the public sector
3. We provide ideas for a future research agenda conserning incentives to motivate
public servants in cases when output related performance measurement and pay
for performance should be avoided.
 TWO VIEWS OF PUBLIC SERVICE
BEHAVIOUR
New Public Management Behavioural Economics
- NPM is characterized by a strong emphasis on output
1. Intrinsic motivation
performance measurement and by introduction of pay for
- enjoyment based intrinsic
performance according to output indicators.
motivation
- Principal agent theory in public service might be - obligation based intrinsic
misleading according to: motivation
2. Extrinsic motivation
1. there exists ample empirical evidence that private and
public employees differ, in particular with respect to their
motivation.
2. In the public sector in contrast to the private sector
there’s no principal as a residual claimant who supervises
the agents in exchange for earning the residual gain.
3. In the public service the goals are often characterized by
high ambiguity.
APPLICATION OF BEHAVIOURAL ECONOMICS IN
PUBLIC SERVICE

The concept of intrinsic and extrinsic motivation has been

applied within the context of public sector employment referred
to as “public service motivation” or PSM.

 Management Control Theory:

1. Output Control
2. Process Control
3. Input Control
MANAGEMENT CONTROL THEORY
In order to specify antecedent under pay for
performance can be expected to deliver its promise
(NPM) and under conditions a negative outcome might
take place (Behavioural Economics)

Two aspect for employing the optimal control

mechanism: (1)The nature of the task, particulary the
measurability of output. (2) The knowledge of the
supervisor about the cause-effect relations, or
transformation process, and the appropriate rules to the
applied

Management Control Theory consist of

Output Process Input
Control Control Control
 Output control can linked to pay for
performance as principal-agent theory
PAY FOR
PERFORMANCE
AND CONTROL Pay for
FORM Performance
and Control
Form

Input control – pay for performance Process control – pay for performance
linked to monetary incentives linked to the correct fulfilment of rules
CONTROL SYSTEM AND INCENTIVE SCHEMES: A RESEARCH AGENDA

 is a bridge between the problems of employee performance

measurement and payment system

Positive Selection Effects

Expolratory

Procedural Fairness

Awards
Conclusion
• Insufficient  Karena teori NPM tidak cukup untuk menjawab
permasalahan mengenai pay for performance dalam sektor publik

• Kontribusinya termasuk pendekatan teori yang lebih dapat

diaplikasikan dalam pendekatan New Governance di sektor publik

• Memberikan masukan, bagaimana meningkatkan motivasi layanan

public ketika output dan proses control tidak bisa diterapkan
(termasuk seleksi, eksplorasi dari pengukuran kinerja, keadilan dan
penghargaan)
Thanks!