Attracting public service motivated employees: how to design compensation packages
| Published date | 01 December 2012 |
| DOI | 10.1177/0020852312455298 |
| Date | 01 December 2012 |
| Subject Matter | Articles |
International
Review of
Administrative
Article
Sciences
International Review of
Administrative Sciences
78(4) 615–641
! The Author(s) 2012
Attracting public service
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DOI: 10.1177/0020852312455298
design compensation packages
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Lotte Bøgh Andersen
Aarhus University, Aarhus, Denmark
Tor Eriksson
Aarhus University, Aarhus, Denmark
Nicolai Kristensen
KORA - The Danish Institute for Local and Regional Government
Research, Copenhagen, Denmark
Lene Holm Pedersen
Copenhagen Business School, Copenhagen, Denmark
Abstract
Public sector managers want to attract employees with high public service motivation as
they are expected to perform better. The public service motivation literature rarely
gives practical advice on how this can be done. Recognizing that compensation packages
act as a sorting device that can be used to attract specific types of workers, we combine
empirical measures of public service motivation with a newly developed approach to
employees’ monetary valuation of compensation packages. This tool can be used to
improve recruitment and retention of employees with high public service motivation.
We find that public service motivated employees have a lower preference for bonus
payments and stronger preferences for health care packages, but the associations
depend on the specific context in which the employees work. This implies that the
employees’ perceptions of the compatibility between the compensation package elem-
ents and societal interest should be taken into account, when the employees are
motivated by doing good for society.
Points for practitioners
The findings of the article have implications for public managers who want to improve
performance in their organizations by attracting employees with a high level of public
Corresponding author:
Lene Holm Pedersen, Copenhagen Business School, Steen Blichersvej 22, 2000 Frederiksberg, Denmark
Email: lhp@akf.dk
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International Review of Administrative Sciences 78(4)
service motivation. Our results indicate that bonuses should then be avoided, especially
in administrative positions and when an emotion-based orientation towards doing good
for others and society is important. Health care packages are generally a good idea,
when it is important to attract employees who want to do good for the specific users of
the service. Private health packages should, however, be avoided in public health care
organizations.
Keywords
compensation packages, personal economics, public management, public service
motivation
Introduction
Many public administration scholars argue that, compared to private sector
employees, money matters less and non-pecuniary benefits matter more to public
sector employees (Crewson, 1997; Rainey, 1982; Wittmer, 1991).1 The public sector
can rarely compete with the private sector when it comes to paying high wages, and
as private companies also seek to attract high-quality employees, public sector
managers have to compete along other dimensions. One way is to strategically
attract employees with high public service motivation. Francois (2000) argues
that government bureaucracy is better at obtaining public service motivated
effort from employees than a private firm is. Public service motivated individuals
are oriented towards ‘delivering service to people with the purpose of doing good
for others and society’ (Hondeghem and Perry, 2009: 6), and empirical studies
suggest that public service motivation affects performance positively (Brewer,
2008; Leisink and Steijn, 2009; Petrovsky and Ritz, 2010).
Although employees are known to choose public sector employment partly
because they have a high level of public service motivation (Andersen and
Pedersen, 2010; Vandenabeele, 2008b), it may be difficult to fully exploit the poten-
tial of public service motivation since job applicants are difficult to screen in terms
of their public service motivation. Sorting by preferences is also well known in
Personnel Economics, a relatively new subfield in economics. The Personnel
Economics literature has made it clear how compensation packages in general
can, and should, be used actively as a sorting device (Lazear, 1995, 1998; Lazear
and Oyer, 2010; Lazear and Shaw, 2007). Carefully designed, a compensation
package may induce one type of applicant, which the employer wants, and con-
currently screen out applicants that do not fit the desired profile of the workplace.
The contributions of this article are threefold. First, we combine empirical meas-
ures of public service motivation with empirical measures of the employees’ pref-
erences for different elements of compensation in a relatively large sample of
employees. Second, we make use of a new method for estimating how employees
value different elements in compensation packages. Third, we analyse the
Andersen et al.
617
relationship between employees’ willingness to pay for elements of compensation
and public service motivation along different dimensions of the latter, also includ-
ing a measure of motivation to help specific others (user-orientation). The purpose
is to make public managers better equipped to attract public service motivated
employees by offering compensation packages that are purposely designed to
attract employees with particular types of public service motivation.
Compensation can be many things. Some studies have already explored the
relationship between public service motivation and monetary incentives (Bright,
2005; Crewson, 1997; Perry et al., 2009), but less tangible benefits such as health
care packages can also be part of the compensation package. Perry and Wise (1990)
suggest that financial incentives such as pay mean less for employees with high
public service motivation, and non-pecuniary factors may therefore be relatively
more important. Empirical evidence on the relationship between total compensa-
tion packages and public service motivation is, however, lacking, probably due to
the challenges involved in measurement of preferences for different elements in the
compensation package. Specifically, it is difficult to find a scale on which to meas-
ure the trade-off between different elements in the compensation package.
However, the methods suggested here diminish this problem.
Recent developments within Personnel Economics (Eriksson and Kristensen,
2010) highlight experimental vignettes as a way to measure the trade-off between
different elements. The vignettes method is applied in this article to analyse the
relationship between public service motivation and preferred elements in the com-
pensation package. For this purpose, a web-based survey has been carried out
among 3094 Danish public and private sector employees. The results regarding
the expected negative association between public service motivation and bonuses,
which has been found in earlier studies using one-dimensional public service motiv-
ation measures, is only statistically significant for employees with high compassion
(strong emotion-based motivation to provide services to others). Regarding pref-
erences for health care packages we find that employees with high compassion and
employees with high user-orientation have stronger preferences for health care
packages. But analysing a subsample of health personnel employed in the public
sector, the within-group variation shows that the association turns negative. Here
employees with high user-orientation have lower preferences for health care pack-
ages than employees with low user-orientation, which indicates that the idea of
private health care – in a country such as Denmark with universal public health
care – may clash with their perception of how public health care should be provided
in order to secure the common good. More generally, this illustrates how combin-
ations of specific job contexts can affect the relationship between employees’ will-
ingness to pay for specific elements of compensation and public service motivation.
After this introduction, the theoretical arguments behind the expectations are
elaborated, followed by a section on methods and data. We then present results and
discuss them. The article ends with a discussion of how public managers should
design compensation packages.
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International Review of Administrative Sciences 78(4)
Types of compensation for public service motivated
employees – some theoretical considerations
Let us first explain what we mean by compensation packages and public service
motivation, respectively.
A compensation package is the specific mix of pecuniary and non-pecuniary
goods offered to the employee by the employer (Lazear, 1998; Lazear and Shaw,
2007). A compensation package consists of four main components: fixed pay, flex-
ible pay, fringe benefits and job characteristics. Fringe benefits can, for example, be
goods and services supplied at a reduced price or offered for free to employees
(such as a computer at home or telephone for use outside office hours) and schemes
such as pension plans and health care packages paid for by the employer. There are
basically two reasons why both employers and employees want part of the com-
pensation to be in some other form than money. First, employers can exploit
economies of scale and provide the benefits cheaper than individual employees
would be able to. Second, employers can use non-pecuniary benefits as a sorting
device to attract specific types of employee. While there is a considerable amount of
research on the first reason,...
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