The Effect of Monetary Incentives on Individual and Organizational Performance in an Italian Public Institution

Abstract

This paper addresses the role of monetary incentives with regard to the performance of employees and organizations. The distribution of monetary incentives among employees in public administration has been investigated. Specifically, the traditional approach of bureaucracy that pays a premium to each employee, based on the position held, is compared with a merit approach which tends to recognize and reward individual contributions. A task advice centrality indicator and a value index have been defined and used to study the performance of employees. The results show a modification of individual behaviors, in line with the theoretical foundations and predictions formulated.

The Role of Monetary Incentives: Bonus and/or Stimulus

“…show that including the "life skills" variables defined in Cainarca et al (2019), the results discussed in Section 5 and 6 are confirmed.…”

“…Finally, comparing the results of the investigation published in Cainarca et al (2019) with the ones obtained here, we also address the reverse causality issue because if the monetary incentives induce a virtuous employee behavior, it means that the monetary incentives are distributed according the employee performance, which means that the monetary incentives represent a bonus for the employee performance.…”

“…The other main variables considered in the analysis are the level of salary, the tenure and the type of contract. In this paper, the variables Problem solving, Team working, Self-organizing, Technical knowledge, Customer oriented, considered in Cainarca et al (2019), have not been included because they do not help in explaining the dependent variables. In fact, the results of the regressions do not change with the inclusion of these variables (see the Appendix of the paper).…”

“…Experimental Table A2. Results of linear regressions described in Equation (6) considering all the life skill variables described in Cainarca et al (2019). ** Significant at the 5%.…”

“…One of the main key ideas of the NPM is that public sector organizations need to introduce performance management based on targets, monitoring and incentives (Cainarca et al 2019;Hood 1995). In other words, in the Public Administration (PA), a performance improvement requires a transition from a "bureaucratic culture" to a results-oriented one that emphasizes outcomes rather than inputs or processes.…”