It’s become a stock piece of management consultant’s advice to public authorities: “Design a pay scheme to reward people for performing better and that’s just what they’ll do”. But is that true?
Take the National Health Service in the
UK. In April 2004, the NHS introduced a performance related pay (PRP)
scheme as part of something called the Quality and Outcome Framework. The idea
was to reward doctors, anesthetists and nurses who achieved or exceeded their
targets for quality with bonuses worth between a quarter and a third of their salary.
There were no fewer than 136 quality indicators. These
covered everything from how chronic conditions are managed, through the way
that practices are run, all the way to the patients’ experience of care.[i]
This is hardly the first time that primary care
doctors or hospital clinicians have been put on a PRP scheme.
Recently, a team of researchers from Harvard
University investigated the effect of a PRP scheme on almost half a million
patients’ records. They reasoned that
that if PRP schemes are working, we should be able to see the results in the
information we have about how patients fare, by looking at their medical
records. The results must have disappointed any management consultant who can’t
think beyond the stock advice. They found that patients were no healthier than
they would have been if there had been no bonus scheme at all. In other words, if
the doctors were motivated by extra cash, it didn’t show up in better outcomes
for their patients. Another team did a systematic and comprehensive review of seventeen US PRP schemes in healthcare.[ii] Their conclusion was much the same: there
were no clear benefits for patients’ health.
So, if financial incentives won’t work, what might? A
recent study by Imran Rasul and Daniel Rogger from University College London begins
to give us some answers.[iii]
They decided to look at Nigeria. The West African
state is an interesting case for a question like this, because the Control of
Corruption Index declares the country to be one of the most corrupt in the
world.[iv] So we’d expect cash to be
a big motivator there. And if it isn’t, then discovering what motivates people
there might well tell us quite a lot about what motivates people to perform
better more generally. Instead of focusing just on health care, Rasul and
Rogger wanted to look more broadly. So they examined almost five thousand
public projects. These were mostly construction and development initiatives
ranging from boreholes through buildings to big projects such as dams and major
roads. A great advantage of looking at big projects is that they usually
involve several organizations. So we can compare agencies which are run in
different ways but which work on the same project, to see whether the way
they’re run makes a measurable difference to the quality of the work people do.
The researchers’ hunch was that if cash doesn’t
necessarily improve performance, maybe workers want more autonomy to make
decisions about their work, and maybe if they get it, they’ll do better work. To
test the idea, they came up with a measure of autonomy. Their index captures
two different things that tend to get rolled together in the idea of autonomy.
First, the researchers measure how much opportunity bureaucrats have to
influence the development of policy and the design of implementation. Next,
their index scores how far agencies have the flexibility to re-organise their
staff to suit the needs of particular projects. Next, they developed separate
scales for performance – for example, whether the project was completed at all
or anywhere near on time.
What they found is extremely important. The key
finding was that giving incentives and relying on heavy monitoring of workers
makes for worse rates of completion of projects that allowing both agencies and
workers within them more autonomy. Put another way, performance management makes
for worse performance than trusting people would.
We know what the management consultants will say, of
course. Maybe the incentives are just poorly targeted. Maybe the project
managers are monitoring the wrong things. Just hire us to design better
performance management, and it will work. But Rasul and Rogger argue that,
because public projects are unavoidably complex and always
have ambiguous goals, it is very hard to
design well-targeted performance incentives
without creating other
distortions. Allowing
professionals some discretion gives them the chance to focus on the main goals
and to strike intelligent trade-offs between all the things that otherwise
become obsessive targets.
After yet another hospital scandal in the NHS when the
pursuit of waiting time targets led managers to pressurise clinicians in a
cancer care unit to falsify patients’ records. Perhaps it’s time to take
Rasul’s and Rogger’s findings seriously. There really are better ways to get
better outcomes – whether that means healthier patients or dams getting built
on time – than cash, targets and terror.
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