The effect of pay for performance on work attitudes in the private, public, and nonprofit sectors: A panel study from South Korea
| Author | Kwang Bin Bae |
| DOI | http://doi.org/10.1177/00208523211027329 |
| Published date | 01 March 2023 |
| Date | 01 March 2023 |
| Subject Matter | Articles |
The effect of pay for
performance on work
attitudes in the private,
public, and nonprofit
sectors: A panel study from
South Korea
Kwang Bin Bae
Dongguk University-Seoul, Republic of Korea
Abstract
The purpose of this study is to examine the differing effects of pay for performance on
organizational commitment and job satisfaction in the public, private, and nonprofit sec-
tors. Using data from the Korean Labor and Income Panel Study, this research found that
pay for performance has a positive relationship with job satisfaction and organizational
commitment in the private sector, a negative relationship with job satisfaction in the
public sector, and a negative relationship with organizational commitment in the non-
profit sector.
Points for practitioners
When organizations in the public and nonprofit sectors begin adopting policies to
increase extrinsic motivation, managers and scholars should carefully consider the nega-
tive effects of monetary incentives on job satisfaction and organizational commitment.
The public sector emphasizes public values and public interests, which explains the sig-
nificant effect of pay for performance on job satisfaction; meanwhile, the fact that the
nonprofit sector focuses on organizational missions and goals, stakeholders, and
employee motivation explains the positive effect of pay for performance on organiza-
tional commitment.
Corresponding author:
Kwang Bin Bae, Department of Public Administration, Dongguk University-Seoul, 30 Pildong-ro 1-gil, Jung-gu,
Seoul, 04620, Republic of Korea.
Email: kbae@dongguk.edu
Article
International
Review of
Administrative
Sciences
International Review of Administrative
Sciences
2023, Vol. 89(1) 186–201
© The Author(s) 2021
Article reuse guidelines:
sagepub.com/journals-permissions
DOI: 10.1177/00208523211027329
journals.sagepub.com/home/ras
Keywords
Job satisfaction, organizational commitment, panel study, pay for performance, sectoral
comparison
Introduction
The rise of New Public Management (NPM) has fueled interest among scholars and prac-
titioners in the application of business-oriented attitudes and operations in the public and
nonprofit sectors (Dart, 2004). As a consequence, governments and nonprofits have
increasingly adopted businesslike incentive structures such as pay-for-performance
schemes to boost employee productivity (Bellé, 2015; Bellé and Cantarelli, 2015;
Ben-Ner and Ren, 2015). Furthermore, public sector employers across the globe continue
to adopt pay-for-performance schemes without clear evidence of their benefits; indeed,
these systems have actually enjoyed a resurgence in the past decade (Brinkerhoff and
Wetterberg, 2013; Eijkenaar et al., 2013; Forest, 2008; Vermeeren, 2017).
According to the Organisation for Economic Co-operation and Development (OECD,
2005), the public sectors in two-thirds of OECD countries—including the US, UK, New
Zealand, and Canada—have adopted performance-related payment schemes to increase
productivity and efficiency. In addition, a survey administered by World at Work and
Vivient Consulting in 2016 found that 76% of respondents among global nonprofit orga-
nizations had implemented incentive pay policies to increase the productivity of their
employees (Lavy, 2007; Swiss, 2005; World at Work and Vivient Consulting, 2016).
Such pay-for-performance policies have, in fact, become ubiquitous in the private,
public, and nonprofit sectors.
Pay for performance continues to be a popular concept across all work sectors, regard-
less of its—at best—mixed results (Bellé, 2015; Bellé and Cantarelli, 2015; Burgess et al.,
2017; Moynihan andPandey, 2007; Stazyk, 2013; Vandenabeele and Hondeghem, 2005).
Support for pay for performance in the private sector is rooted in expectancy theory
(Vroom, 1964). Expectancy theory simply posits that people have an expectation that
effort will lead to performance, which will, in turn, lead to rewards. Its proponents
contend thatincreased income can boostemployees’job satisfactionand feelings of accom-
plishment and belonging (Brown and Sessions, 2003; Green and Heywood, 2008).
On the other hand, opponents of pay for performance in the public and nonprofit
sectors claim that monetary incentives might be ineffective or even counterproductive
in these sectors (Chenhall, 2003; Moynihan and Pandey, 2007). They argue that theories
based on self-interest cannot explain the motivations of employees in the public and non-
profit sectors (Moynihan and Pandey, 2007; Vandenabeele and Hondeghem, 2005), con-
tending, moreover, that value conflicts and goal ambiguity in the public and nonprofit
sectors make pay for performance ineffective in these areas. Proponents of this perspec-
tive insist that for public servants and nonprofit employees, intrinsic motivations are more
effective than extrinsic motivations, and employees in the public sector have difficulty
matching their goals and performance.
This study examined the effect of pay for performance on organizational commitment
and job satisfaction in the public, private, and nonprofit sectors. Whereas previous studies
Bae 187
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