Can pay-for-performance increase the motivation of public employees? By providing a basis for personnel decisions, particularly linking rewards to performance, performance appraisals aim to increase employees' work motivation and ultimately to improve their work performance and organizational productivity. With the emphasis on results-oriented management, performance appraisals have become a key managerial tool in the public sector. Critics charge, however, that pay-for-performance is ineffective in the public sector, largely because the link between performance and rewards is weak. However, no one has empirically measured the strength of the linkage. If performance ratings do have an impact on career success in the federal service, they might contribute to race and gender inequality. Although many studies have examined factors affecting gender and racial differences in career success, studies that try to connect gender and racial inequalities to managerial tools are scarce. Using a one percent sample of federal personnel records, the first essay examines the impact of performance ratings on salary increases and promotion probabilities, and the second essay explores whether women and minorities receive lower ratings than comparable white males, and women and minorities receive lower returns on the same level of performance ratings than comparable white males. The first essay finds that performance ratings have only limited impact on salary increases, but that they significantly affect promotion probability. Thus, the argument that performance-rewards link is weak could be partially correct, if it considers only pay-performance relationships. The second essay finds that women receive equal or higher performance ratings than comparable white men, but some minority male groups, particularly black men, tend to receive lower ratings than comparable white men. On the other hand, the returns on outstanding ratings do not differ between women and minority male groups and white men, though women groups seem to have disadvantages in promotion with the same higher ratings as comparable men in highly male-dominant occupations.

Thesis (MBA (Business Management))--Stellenbosch University, 2008. / ENGLISH ABSTRACT: Value added links a company’s financial statements to the national income and performs a useful function in macro-economic measurement. At the national level, productivity is a major determinant of economic growth and progress and of vital importance to the survival and wellbeing of all South Africans. The presentation of information in added value terms can provide an effective communication tool that enables all personnel at all levels to understand where the business stands, what their roles in it are and what can be done to improve certain ratios. The concept of value added does not only act as a communication medium in showing how a company is performing, but also demonstrates the need for increased wealth to ensure higher distribution to all the stakeholders. This research report aims to establish, amongst other matters, the future use of value added as a proxy for productivity as a basis (a new mindset) for determining salary increases at tertiary institutions. Because this could be regarded as a leap into the unknown, this study used the results of the industrial sector for benchmarking. As tertiary institutions never previously published a value added statement it was decided to follow the practice of the Value Added Scoreboard since 2002; that is, to compile a value added statement for tertiary institutions using the audited annual reports and, specifically, the income statement. The handling of part-time, casual or seasonal employees can cause measurement problems in the value added per employee ratio. The matter is also further complicated by the fact that there is a lack of full description of employee data in the financial statements as to whether or not the published employee numbers refer to either full-time equivalent, average number of employees over the period or number of employees at year end. If one is to use employee numbers to do an analysis of certain ratios there needs to be clarity in future on how these numbers must be reported. In conclusion it was found that the low increase or decrease in salaries, together with the increase in employee numbers resulted in a negative growth rate in salaries per employee. The conclusion can thus be made that the tertiary institutions did not take productivity into account when granting salary increases. Finally, though this research report was only exploratory, the recommendation can be made that the concept of value added should be implemented at tertiary institutions, preferably by firstly taking the research staff of the entire institution and from there the distribution per department into account, and lastly to reflect the value added for the institution as a whole. / AFRIKAANSE OPSOMMING: Toegevoegde waarde verbind ’n maatskappy se finansiële state met die nasionale inkomste en vervul ’n nuttige rol as makro-ekonomiese maatstaf. Op nasionale vlak is produktiwiteit ’n vername bepaler van ekonomiese groei en vordering en is dit van kardinale belang tot die oorlewing en welstand van alle Suid-Afrikaners. Die aanbied van inligting in terme van toegevoegde waarde kan ’n doeltreffende kommunikasie-instrument wees wat alle personeel op alle vlakke in staat stel om te verstaan wat die stand van sake is, wat hulle rolle binne die besigheid is en wat gedoen kan word om sekere ratio’s te verbeter. Die toegevoegdewaarde-konsep dien nie slegs as kommunikasiemiddel om die maatskappy se prestasie aan te dui nie, maar toon ook aan dat daar ’n behoefte is aan groter rykdom om hoër verspreiding aan alle belanghebbendes te verseker. Hierdie navorsingsverslag het ten doel om onder meer die toekomstige gebruik van toegevoegde waarde te vestig as ’n aanduider vir produktiwiteit as ’n grondslag (’n nuwe geestesingesteldheid) vir die vasstel van salarisverhogings by tersiêre instellings. Aangesien dit beskou kan word as ’n sprong in die duister, het hierdie studie die resultate van die nywerheidsektor as normstelling gebruik. Omdat tersiêre instellings nog nooit vantevore ’n toegevoegde waarde-staat gepubliseer het nie, is daar besluit om die praktyk van die Toegevoegdewaarde-telbord sedert 2002 te volg. Dit beteken dat ’n toegevoegde waarde-staat vir tersiêre instellings saamgestel is deur die geouditeerde jaarverslae en, spesifiek, die inkomstestaat te gebruik. Die hantering van deeltydse, los of seisoenwerkers kan metingsprobleme in die toegevoegde waarde per werknemer-ratio tot gevolg hê. Die saak word ook verder bemoeilik deur die feit dat daar ’n gebrek aan volledige werknemerinligting in die finansiële state is wat betref of die gepubliseerde werknemergetalle verwys na die voltydse ekwivalent, die gemiddelde getal werknemers oor die tydperk, of die werknemers met jaareinde. Indien die werknemergetalle gebruik word om ’n ontleding van sekere ratio’s te doen, is dit duidelik dat daar in die toekoms meer klaarheid moet wees oor die wyse waarop hierdie getalle gerapporteer moet word. Daar is gevolglik bevind dat die lae styging of daling in salarisse, tesame met die styging in werknemergetalle, tot ’n negatiewe groeikoers in salarisse per werknemer lei. Die gevolgtrekking kan dus gemaak word dat die tersiêre instellings nie produktiwiteit in ag geneem het toe salarisverhogings toegestaan is nie. Laastens, alhoewel hierdie navorsingsverslag slegs verkennend van aard was, kan die aanbeveling gemaak word dat die konsep van toegevoegde waarde by tersiêre instellings geïmplementeer word. Verkieslik deur eerstens die navorsingspersoneel van die instelling te neem, daarna die verdeling per departement en dan laastens om toegevoegde waarde vir die instelling as geheel weer te gee.

Can pay-for-performance increase the motivation of public employees? By providing a basis for personnel decisions, particularly linking rewards to performance, performance appraisals aim to increase employees' work motivation and ultimately to improve their work performance and organizational productivity. With the emphasis on results-oriented management, performance appraisals have become a key managerial tool in the public sector. Critics charge, however, that pay-for-performance is ineffective in the public sector, largely because the link between performance and rewards is weak. However, no one has empirically measured the strength of the linkage. If performance ratings do have an impact on career success in the federal service, they might contribute to race and gender inequality. Although many studies have examined factors affecting gender and racial differences in career success, studies that try to connect gender and racial inequalities to managerial tools are scarce. Using a one percent sample of federal personnel records, the first essay examines the impact of performance ratings on salary increases and promotion probabilities, and the second essay explores whether women and minorities receive lower ratings than comparable white males, and women and minorities receive lower returns on the same level of performance ratings than comparable white males. The first essay finds that performance ratings have only limited impact on salary increases, but that they significantly affect promotion probability. Thus, the argument that performance-rewards link is weak could be partially correct, if it considers only pay-performance relationships. The second essay finds that women receive equal or higher performance ratings than comparable white men, but some minority male groups, particularly black men, tend to receive lower ratings than comparable white men. On the other hand, the returns on outstanding ratings do not differ between women and minority male groups and white men, though women groups seem to have disadvantages in promotion with the same higher ratings as comparable men in highly male-dominant occupations.