This document discusses distortions in performance appraisals and their impact on employee motivation. It puts forth 5 main propositions: 1) Intrinsic motivation is generally a stronger driver for public employees than extrinsic rewards. 2) For extrinsic motivators to be effective, there needs to be a transparent link between performance and outcomes. 3) Managerial biases like favoritism and personal factors can negatively impact performance evaluations. 4) Incentives are often used as organizational control mechanisms and exacerbate existing biases. 5) Perceptions of unfair treatment have a greater impact on motivation than distributive or procedural unfairness. The document uses research data and examples to support each proposition

1. SHANTANU BASU
Date: April 23, 2008
Distortions in Performance Appraisals and Employee Perceptions of Fairness in
Rewards and Incentives and Career Development: Negative Fallout on Intrinsic
Motivation?
Abstract
The failure of the performance appraisal system in government stems primarily from attitudinal
problems on either side of the fence – employee and manager. The attempt to transpose private
sector norms such as merit pay on a civil service system that had hitherto relied on intrinsic
commitment to public service for its existence opened a Pandora’s Box and perhaps undid a
large part of the old system, without substituting a workable new system. While governments
have immersed themselves in attempts to figure out what went wrong with the system of
extrinsic rewards, research too has primarily confined itself to the very same diagnosis instead of
a prognosis and corrective measures. This paper hypothesizes that unless more objective and
standardized performance appraisal systems are put in place, intrinsic motivators would continue
to weigh heavily against extrinsic motivators. Further, extrinsic motivators without adequate
transparency may even harm the intrinsic motivation of federal employees. Federal employeebased survey data from 2005-07 is used to test this hypothesis.
Introduction
Expectancy theory is an important basis of the performance/merit-based system, the four
main pillars of which are effort, performance, result and reward. The theory posits that an
individual is likely to change his/her behavior as a function of the strength of the desire to
receive an award (or to avoid a punishment). Performance is likely to change by varying effort,
and such a change would lead to the desired result. At the applied level this translates into
rewards for good performance and penalties for poor performance. However, judging of
performance is predicated on the fairness of the evaluation system apart from other
psychological, economic and political factors. Over the last fifteen years several merit pay and
other extrinsic motivation schemes have been evolved for government employees. However, the

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perception is that most of them failed for a bevy of reasons discussed below. The research
questions therefore asked by the author are: Are public employees motivated more by intrinsic
motivators or extrinsic motivators? Do extrinsic motivators impact the intrinsic motivation of
public employees?
Motivation versus Reward
The fundamental assumption that pay is a critical element in fostering the motivation of
public employees may not be entirely well founded (Lane and Wolf, 1990; Perry and Porter,
1982; Sherwood and Wechsler, 1986). Many organizational researchers have suggested that
employee work motivation is related more closely with intrinsic rewards of the work than with
the level of compensation earned (Herzberg, 1966; Hackman and Lawler, 1971; Hackman and
Oldham 1980). These scholars stress the importance of employee participation and employee
perceptions of the significance of their work. Though expectancy theory recognizes that people
may differ substantially regarding what is important to them, merit pay systems do not take such
differences into account. Lovrich’s study of Washington state employees showed that work place
participation and job enrichment were the main determinants of motivation and job satisfaction.
Lovrich (1987:66) found that little evidence existed to argue that pay concerns were primary in
the minds of Washington state employees when it came to the consideration of workplace
motivation. A similar conclusion was reached by Sherwood and Wechsler (1986) in their review
of pay-for-performance schemes for senior public managers in the federal and state governments,
and by Daley (1987) in an analysis of the federal Merit Pay System. Perry and Wise (1990)
charged that the current trend of public motivation programs failed to acknowledge unique
motives underlying public sector employment. They pointed out that public service motivation
was commonly associated with normative orientations such as a desire to serve the public
interest or social equity. Public organizations that attracted employees with high levels of public
service motivation would not have to construct incentive systems that were predominantly
utilitarian to energize and direct member behavior. (Perry & Wise, 1990: 371). Yet the
overriding intrinsic motivation of a government employee is sought to be supplemented by
extrinsic motivation in the form of rewards and incentives like merit pay. What confounding
factors affect extrinsic motivation?

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Proposition I: Intrinsic motivation is a stronger driver for public employees than extrinsic
rewards and incentives
Psychological Factors: Employee Level
Psychological factors affecting merit pay operate in an organization at two levels, viz.
employee and manager. At the employee level, the merit pay system relies on the linkage
between effort-performance and performance-outcome expectancies. However, there are major
pitfalls in establishing these links that may not correspond to expectancy theory. For example,
the theory assumes effort-performance expectancies, performance-outcome expectancies, and
perceived value of the outcome to be independent that may not be the case. People may, for
instance, place higher value on outcomes they believe are more difficult to achieve (Pinder,
1984). Furthermore, expectancy theory assumes that people are rational actors, but much of
human behavior is habitual and subconscious rather than rational (Pinder, 1984). Halachmi and
Holzer (1987) state that there is little empirical evidence to support the claim that the individual
behavior represents not only a calculated effort but a conscious choice. It may also be the case
that employees do not always think about the two expectancies or the value of probable
outcomes. Halachmi and Holzer (1987) conclude that, given possible weaknesses of the
underlying theory, incentive schemes such as merit pay may not produce the intended results,
mainly on account of individual perceptual differences.
Adding to the fallibility of these linkages is the relation of performance and evaluation.
For employees to perceive a performance-outcome linkage in an organization, it must be visible
and trustworthy (Lawler, 1981). In fact, a climate of trust within the organization can be critical.
Golembiewski (1986) contends that the absence of this kind of organizational culture or climate
will significantly inhibit the success of merit pay programs. Employees generally do not agree
with their performance appraisals (Campbell & Lee, 1988; Meyer, 1980) and presumably do not
accept the evaluations as accurate. Although the use of observable, objective criteria somewhat
mitigates this problem, it does not eliminate it. As Fisher et al (1993) have noted factors beyond
the individual’s control (e.g., the quality of a work machine) can affect even objective
performance. The numbers are not in dispute; the causes for the numbers are. Additionally, a
complex set of informational, cognitive, and affective constraints influence self evaluation, and
these constraints make it extremely unlikely that individuals will agree with evaluations lower

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than their own (Campbell & Lee, 1988). While deliberate distortion may account for some of the
disagreement, more fundamental factors (i.e., different cognitive schemas; defense mechanisms,
etc.) also operate. Due to such disagreement, many employees simply do not see merit pay as
truly rewarding performance (Hills et al., 1987; Kanter, 1987; Vest, Hills, & Scott, 1989).
Proposition II: Extrinsic motivators require a transparent linkage between performance and
outcome to be able to appeal to employees
Psychological Factors: Managerial Level
Insofar as managers are concerned, giving evaluative feedback is often anxiety-provoking
for the appraiser, and managers are therefore uncomfortable with the whole feedback process.
Several factors contribute to this. First, the typical feedback session is characterized by
disagreement, making the normal session unpleasant. Second, the supervisor is trying to meld
several distinct objectives by evaluating and rewarding past performance while attempting to
develop and motivate future performance at the same time. This dual focus makes it difficult to
accomplish either of the objectives well (Campbell et al, 134).
Other psychological biases in raters (managers) include extraneous factors as well. Mark
Cook quotes two separate studies that showed a strong link between physical attractiveness –
rated on a five-point scale – and later salary level for nurses. Each extra scale point of rated
attractiveness was “worth” $2,000-2,600 more in salary. This implied that the salary difference
between the most and least attractive could be as great as $13,000.The effect was for males, in
“male” jobs, and in older age groups. Appraisals were strongly biased by appearance, and the
bias was not confined to young female ratees only. In fact it was probably strongest in traditional
management circles (Cook, 3-4). Citing another example of such bias, Cook says that promotion
in the Royal Navy of the 1890s went to officers with the most highly polished ships, which
caused a few to behave as if they had forgotten what battleships were for; they avoided gunnery
practice in case the powder smoke spoiled their paintwork (5) – a classic case of goal
displacement. Thus subordinates who helped managers to feel proud of being a good manager, or
helped to make them feel fulfilled, received better appraisals (4).
Similarly, most work groups can be divided into an in-group, whose members enjoy the
supervisor’s confidence and therefore are assigned the more challenging tasks, and an out-group,
whose members are treated like “hired hands” and are assigned the mundane tasks. Research on

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bank staff shows that in-group members get better appraisals but do not perform any better on
objective performance indices. This implies that the in-group members achieve their position by
paths not necessarily related to better work (Cook, 4). Detailed interviews with managers who
regularly carry out appraisals showed that three-quarters of them freely admitted that they allow
personal likes to inflate appraisals and conversely, dislike to lower them (Cook, 4). The same
report also states that 83% of managers say being in a good or bad mood shifts the appraisals
they make – probably downwards in most cases, given that 73% said they hated having to
appraise (Cook, 4).
Cook also states that ingratiation and other impression management techniques also have
an adverse bearing on appraisal ratings, and make them less accurate reflectors of an employee’s
true worth to an organization. Apart from undermining performance appraisals, this affects
employee morale, when employees who are good at ingratiating themselves, but, get merit
awards, or promotion, or other marks of favor although their performance is relatively poor(5).
Proposition III: Extraneous and personal biases of managers play an important negative role in
determining the distribution of extrinsic motivators.
Political & Economic Factors
Control Mechanism: At the organizational level the continued use of merit pay in the
public service is perceived as a control mechanism (Thayer, 1984; Gabris, 1986; Lovrich, 1987)
associated with directing and coordinating organizational processes. Therefore any mechanism to
facilitate the performance of such tasks enjoys support from management. Those who control the
performance appraisal process also control the distribution of awards and, by implication,
employee behavior. Thus merit pay and other incentives become a means of strengthening the
organizational hierarchy and imposing greater control over employees by increasing the leverage
available to management. In fact, a major conclusion of Gabris’ (1986) study was that
supervisors support merit pay precisely because they believe it enhances their control over
subordinates.
Grievances: Klaas and DeNisi state that the treatment of employee grievances by managers is an
important issue in performance appraisal motives. Given the importance of the categorization
process in performance appraisal (DeNisi, Cafferty, & Meglino, 1984; Feldman, 1981), it is
likely that grievances filed by an employee may cause him/her to be labeled a troublemaker, a

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categorization that will then be used as a framework for interpreting all other behavior the
grievant exhibits. Moreover, research has suggested that a supervisor's attitude toward a ratee
will have an effect on the processing of information about the ratee at the pre-recognition stage
(Alexander & Wilkens, 1982; Cardy & Dobbins, 1986; Moreland & Zajonic, 1977; Wilson &
Zajonic, 1980). If the filing and processing of a grievance influences a supervisor's attitude
toward an employee, such change in attitude may result in unconscious bias, and thus, lower
ratings for the grievant (705).
Intentional Distortion of Ratings: Managers may also intentionally distort the ratings they assign
to a grievant. Longenecker, Gioia, and Sims (1987) found that under certain conditions managers
were willing to intentionally deflate the ratings assigned to particular employees (706).
Conversely, in order to avoid conflict and maintain good relations with subordinates, many
supervisors tend to inflate ratings (Lane and Wolf, 1990). Perry et al (1989) found that 99% of
employees in the U.S. General Services Administration received ratings of “Fully Successful” or
above; those employees were then eligible for merit increases. While pay increases in some parts
of the federal service are still largely automatic just as in the days prior to the CSRA. In their
study of a public sector organization, Klass and DeNisi found that as the number of grievances
by an employee increased within a period, the evaluation assigned to that employee declined and
as the number of positive outcomes from such grievances increased within a period, the
evaluation assigned to that employee declined (711). They also found that the effects of
grievance activity against supervisors may extend beyond the year in which a grievance is filed
(712). Nongrievants' ratings remained essentially constant over the same period (713).
Organizational Cheating: Considerations of physical survival and the need to avoid budget cuts
and public and legislative disapprobation lead organizations to cheat on their appraisal data. In
their study of public schools, Bohte and Meier concluded that cheating is likely to occur in
organizations in which the day-to-day activities of bureaucrats are not heavily monitored (for
example, highly decentralized bureaucracies) (180). Such a scenario often applies in human
service bureaucracies—those dealing with problems such as social welfare, law enforcement,
and education (Lipsky 1980; Keiser and Soss 1998). They stated that cheating is also likely to
occur when program designs include incentive-based structures (180).

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Proposition IV: Incentives are used as organizational control mechanisms and compound
existing managerial biases.
Typology of Justice
Erdogan states (556) that the taxonomy that is most often used to describe organizational
justice is distributive and procedural justice (Cropanzano & Folger, 1991). More recently,
interactional justice has been introduced as a third type of justice (Bies & Moag, 1986).
Procedural justice refers to the fairness of procedures by which performance is evaluated. Even
when the outcome of the appraisal is fair, procedures used to arrive at those outcomes may be
unfair (Erdogan, 557). Interactional justice has been defined as the fairness of interpersonal
treatment received during the execution of a procedure (Bies & Moag, 1986) and emphasizes the
importance of truthfulness, respect, and justification as fairness criteria of interpersonal
communication (Erdogan, 557). It may therefore be concluded that although the interaction of
procedural and interactional justice impacts a performance appraisal, the perceptions of fairness
are more conditioned by interactional justice that is more germane to the employee and defines
the appraisal relationship between the manager and employee.
Proposition V: Interactional justice is the basis of employee perceptions of managerial
unfairness; the higher the perception of unfairness, the lower would be the value assigned to
extrinsic motivators
Fallout on Rewards and Incentives: The Example of Merit Pay
Merit pay systems in the federal government introduced by the CSRA, 1978 have had a
limited impact on productivity. Although expectancy theory seeks to establish a link between
performance and outcomes, in practice, this has been difficult to achieve. Pearce and Perry
(1983) stated that federal managers were less likely to believe that higher performance would
lead to increased pay under the federal MPS program than they had been under the previous
compensation system. In a similar vein, Gaertner and Gaertner (1984) found that few employees
thought that merit pay would improve agency effectiveness. Similarly, Lovrich (1987) found that
merit pay was not a salient determinant of Washington state employee motivation. Heneman and
Young (1991) stated that public school administrators were largely unmotivated by merit pay
and that the effort-performance and performance-outcome expectancies were low.

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A major reason is the absence of accurate and equitable system for evaluating
performance is essential to increase the perceived probability that good performance will lead to
rewards. In the public sector, however, goals and performance criteria are often diverse,
conflicting, and difficult to measure (National Research Council, 1991;). Not surprisingly,
Kellough showed that a perception of ineffectiveness of merit pay was all-pervasive across states
and the federal government (50). The inability to distinguish between good and average
performers stems from a variety of reasons, most of which fall in psychological, political and
economic factors discussed supra. The lack of credibility may be exacerbated by the fact that
supervisors are not well trained in evaluating subordinates (Mount, 1987; Sigel, 1987) and a
supportive organizational culture/climate has not been developed (Golembiewski, 1986). The
lack of uniform evaluation standards has added to the lack of credibility and deprived the system
of trust by the employee. One study found that only 49% of federal employees surveyed agreed
with the statement performance appraisal systems accurately rated “my job performance”.
(Bann and Johnson, 1984). According to a report by the U.S. Merit Systems Protection Board
(MSPB), 47% of federal employees surveyed lacked trust and confidence in their immediate
supervisors (U.S. Merit Systems Protection Board, 1990). This has thus served to reduce
organizational commitment for employees who received lower evaluations. Pearce and Porter
(1986) found that organizational commitment decreased for those employees who received
merely “Satisfactory” ratings.
Merit pay programs in the public sector also frequently lack adequate funding (Pearce,
1989; Perry, 1988- 89, National Research Council, 1991; Siegel, 1987). The Merit Pay System
established by the federal government in 1981, for example, could spend no more on merit pay
than had been spent earlier under the previous general schedule system. According to Perry
(1988-89), the requirement of budget neutrality was one factor that significantly damaged the
prospect that noticeable improvements in agency performance could be achieved through merit
pay. Budget constraints have also limited the release of merit pay on a wider scale. Mitra et al
showed that increase below about 10% of base pay, perceptions of a linkage between
performance and pay steadily weaken. Mitra et al thus concluded that the smaller the raise, the
less likely that people will view it as dependent on performance and, consequently, the more
likely that it may decrease their motivation (74-75). Rather the basic minimum percentage hike

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should be 6-7% with no distinction being made in percentages on the basis of base pay at any
level (75).
A survey of Georgia public employees after implementation of merit pay indicated that
most employees felt that quotas on good performance ratings had been imposed, not enough state
money had been available to reward good performers, their pay was not competitive with that of
the private sector, and it was still hard to recruit qualified applicants. Few managers and
nonsupervisory employees felt that merit pay was a good way to motivate employees. There was
a sharp drop in satisfaction from before to after implementation of the system in virtually every
area of the personnel system. Those saying that they were likely to leave their jobs within the
next year increased rather than decreased (Nigro & Kellough, 2006). Pearce (1989: 402)
observes, however, that financial constraints on pay-for-performance systems are nearly
unavoidable because “the need to pay the market wage for each job and various requirements to
maintain internal equity across departments and hierarchical levels results in proportionately
small amounts retained for merit raises and bonuses”. In addition, the political environment of
public organizations makes large pay increases difficult to achieve, especially in times of fiscal
stress and mandatory budget reductions.
Kellough says that the subjective nature of appraisals has increased discretion of
managers (53). The National Research Council (1991, p. 31) has argued, for example, that “the
managerial constraints and legalistic environment that have come to characterize federal
management are antithetical to the managerial discretion necessary for effective pay-forperformance processes”. There is, in effect, a “tension between the principle of neutral
competence and pay for performance” (National Research Council, 1991: 31). In the public
sector, organizational missions and purposes are defined politically by executive and legislative
action to minimize which civil service procedures based on merit principles, including neutral
competence and employee protection from partisan manipulation. This complicates and calls into
question the application of merit pay to middle and higher level positions in the civil service.
Thus while merit pay systems required an autonomous environment for effective functioning, the
civil service system with its concomitant political and financial pressures made for its failure.

10. Basu 10
Proposition VI: Inadequate funding for incentives and political intervention has increased
managerial discretion and employee perceptions of unfair appraisal and further compounded
managerial biases.
Research Design
To recapitulate, the following propositions emerged from the above discussion:

Intrinsic motivation is a stronger driver for public employees than extrinsic rewards and
incentives;

Extrinsic motivations require a transparent linkage between performance and outcome to
be able to appeal to employees;

Extraneous and personal biases of managers play an important negative role in
determining the distribution of extrinsic motivators;

Incentives used as organizational control mechanisms compound existing managerial
biases;

Interactional justice is the basis of employee perceptions of managerial unfairness; the
higher the perception of unfairness, the lower would be the value assigned to extrinsic
motivators;

Inadequate funding for incentives and political intervention has increased managerial
discretion and employee perceptions of unfair appraisal and further compounded
managerial biases.
Accordingly, the research design would have intrinsic and extrinsic motivation affecting the
effectiveness of rewards and incentives; intrinsic motivation would have two control
variables, viz. employee alignment with the organization and level of satisfaction while
extrinsic motivation would have three control variables, viz. managerial biases, adequacy of
funding for rewards and incentives (including merit pay) and employee perceptions of
fairness of appraisals. Fig.1 is a diagrammatic representation of the research design.

11. Basu 11
Effectiveness
of Rewards and
Incentives
Intrinsic
Motivation
Employee
Expectations
Level of
Employee
Satisfaction
Extrinsic
Motivation
Managerial
Biases
Adequacy of
rewards
Employee
perceptions of
fairness
Fig. 1
(First level is dependent variable, 2nd level independent variables & 3rd control variables)
The above research design would be tested on data for federal government employees
from the Federal Human Capital Survey (FHCS), 2006, MSPB’s MPS 2005 and the Best Places
to Work (BPW) Survey, 2007. The FHCS is an 84-item survey that includes 11 demographic
questions and 73 items that measured Federal employees’ perceptions about how effectively
agencies manage their workforces. The 84 items in the questionnaire are grouped into eight topic
areas respondents see as they proceed through the survey: Personal Work Experiences;
Recruitment, Development, and Retention; Performance Culture; Leadership; Learning
(Knowledge Management); Job Satisfaction; Benefits; and Demographics. Employees were
grouped into 875 sample subgroups corresponding to agency, subagency, and supervisory status
reporting requirements. A total of 436,020 employees were randomly selected to participate in
the survey with a response rate of 57%. The Best Places to Work (BPW) survey is carried out by
The Partnership for Public Service and American University’s Institute for the Study of Public
Policy Implementation and use data from the FHCS to rank agencies and subcomponents.
Agencies and subcomponents are ranked on a BPW index score, which measures overall
employee engagement. The BPW score is calculated both for the organization as a whole and

12. Basu 12
also for specific demographic groups. In addition to this employee engagement rating, agencies
and subcomponents are also scored in 10 workplace environment (“best in class”) categories
such as effective leadership, employee skills/mission match and work/life balance. The BPW
survey ranks 29 large, 31 medium and 222 subcomponents of agencies. The top five ranked
organizations for being the best places to work in the federal government are Nuclear Regulatory
Commission (NRC), Securities & Exchanges Commission (SEC), NASA, Departments of
Justice (DoJ) and State (DoS) while the five lowest ranked in the same survey are National
Record & Archives Administration (NARA), Departments of Transportation (DoT), Department
of Education (DoEd) and Homeland Security (DHS) and Small Business Administration (SBA)
in that order (the lowest five are not necessarily the worst places to work either). For the limited
scope of this paper only these ten agencies from the BPW dataset would be analyzed.
Intrinsic Motivation
Table 1 summarizes FHCS data on the positive responses received. Positive responses
have been reckoned to be the total of strongly agree and agree points on a 5-point Likert scale.
This paper does not consider “Neither agree nor disagree” point valid for arriving at a positive or
negative response since this would skew the interpretation of data.
Table 1
Question
The work I do is important
I like the kind of work I do
My work gives me a feeling of personal accomplishment.
I have enough information to do my job well
Considering everything, how satisfied are you with your job?
I recommend my organization as a good place to work
My talents are used well in the workplace
Considering everything, how satisfied are you with your pay?
I feel encouraged to come up with new and better ways of doing things
Considering everything, how satisfied are you with your organization?
How satisfied are you with the training you receive for your present job?
How satisfied are you with the recognition you receive for doing a good job?
How satisfied are you with the policies and practices of your senior leaders?
How satisfied are you with your opportunity to get a better job in your organization?
Average score for this group of questions
Positive
Responses
(%age) FHCS
90.20
83.40
72.90
72.40
67.50
63.60
61.50
61.30
60.30
56.20
53.70
48.60
40.90
36.50
62.07

13. Basu 13
It would be seen from Table 1 that on a rough average nearly two-thirds of employees
have a high intrinsic motivation for public service and 90% think their work is important while
about three-quarters of employees have a sense of personal accomplishment. Over two-third of
employees are satisfied with their pay and jobs while about two-third would recommend their
organization as a good place to work. At the same time, less than half are satisfied with the
recognition they receive and even less by their perceptions of the abilities of their leaders. In fact
when the latter two responses are considered the average score for this group of questions
declines substantially. Data from the MPS 2005 showed that 95% employees felt that their
agency’s mission was important to them (6) while 88% felt their work was meaningful to them
(6) which is consistent with the FHCS data above. Over three quarter of employees would
recommend their agency (11). However, training seems to be a sore point in both datasets as the
MPS 2005 shows 48% employees speaking of inadequate training (16) and a mean 60%
employees feeling that they are given a real opportunity to improve their skills in their
organization which too is consistent with the FHCS data above. There is however, a major point
of departure between the two datasets insofar as perceptions of leadership are concerned. While
the FHCS data shows only 41% employees satisfied with the policies and practices of their
leaders, the MPS 2005 data shows 63-71% satisfaction in the “Overall, I am satisfied with my
supervisor” responses and 45-57 in the “Overall, I am satisfied with the managers above my
immediate supervisor” responses. It would thus seem that disenchantment with senior leadership
is higher than with immediate supervisors.
The inherent strength of intrinsic factors also shows if the top five and bottom five
organizations listed in the BPW, 2007 are compared for matching employee skills and mission.
Organization
Overall BPW
Rank
NRC
SEC*
NASA
DoJ
DoS
NARA
DoT
DoE
DHS
SBA
TABLE 2
BPW/Employee
Skills/Mission
Match Rank
1
8
4
5
9
19
23
27
29
26
BPW/Teamwork
Rank
1
10
2
18
4
28
25
26
29
22
* SEC has been moved up from third to second
place since GAO data is NA for 2nd place

14. Basu 14
The link between employee skills and mission match and teamwork, all key ingredients
of intrinsic motivation, is abundantly clear from the above table. Only in the case of DoJ there is
an apparent disconnect between employees and leadership that manifests itself in poor teamwork
that lowers the quality of intrinsic motivation. For the low ranked organizations all three
parameters are proportionately low making for relatively lowly motivated organizations. The
data ties in with the findings of the literature review that states that intrinsic motivation is the
strongest driver for public servants. It is evident that public employees are intrinsically motivated
for public service and take pride in their work and work place. Most of them are satisfied with
their jobs and the scope of doing well at their present jobs provided more skills training is
imparted to them. They also work well as teams showing that each member of a team is
generally intrinsically motivated. Thus the basic motivator of a public employee is intrinsic,
rather than extrinsic. However, it may be stated that the trends in the dataset have been viewed as
a combination of agencies and agency level differences may be wide in some cases. At the same
time, there appears to have been a perceived need for extrinsic motivators to encourage
employees to use their knowledge and skills more strongly for the agency. Does extrinsic
motivation harm intrinsic motivation by creating perceptions of unfairness among committed
public servants and thereby act as a demoralizing agent?
Extrinsic Motivation
Extrinsic motivation is provided by organizations in the shape of promotions, rewards
and incentives, including, but not limited to, merit pay. Table 3 shows the relative overall BPW
score of the ten agencies chosen on the basis of their overall score as the top and lowest five best
places to work in the federal government.
Table 3
The Top Five
The Bottom Five
Department BPW (%) Department BPW (%)
(A)
(B)
(C)
(D)
NRC
76.2
NARA
54.9
SEC*
71.9
DoT
52.9
NASA
69.7
DoE
52.1
DoJ
69.0
DHS
49.8
DoS
67.9
SBA
43.4
Average
70.94
Average
50.62
Diff.
(B-D)
21.3
19.0
17.6
19.2
24.5
20.32
* GAO that is ranked top
second
has
not
been
considered since complete
data is not available and SEC
has been moved up from third
to second place

15. Basu 15
It would be seen that there is a 33% difference in overall BPW score between the top ranked and
last ranked agency in the survey with an average difference of about 20% between the top and
bottom five ranked agencies in overall rankings. It would be therefore worthwhile to analyze the
FHCS data on reactions to such extrinsic motivators, starting with Table 4 that shows
perceptions of employees with regard to their own/group work, interaction with immediate
managers, etc.
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
Table 4
Question
Positive
Responses
(%age)
How would you rate the overall quality of work done by your work group?
83.00
I am held accountable for achieving results
79.10
Overall, how good a job do you feel is being done by your immediate
66.20
supervisor/team leader?
My performance appraisal is a fair reflection of my performance.
64.40
I have trust and confidence in my supervisor
63.80
Prohibited Personnel Practices are not tolerated.
58.90
Discussions with my supervisor/team leader about my performance are
55.90
worthwhile
I have a high level of respect for my organization's senior leaders.
49.20
My organization's leaders maintain high standards of honesty and integrity.
48.70
I can disclose a suspected violation of any law, rule or regulation without fear
48.00
of reprisal
I have sufficient resources (for example, people, materials, budget) to get my
47.60
job done
Arbitrary action, personal favoritism and coercion for partisan political
45.20
purposes are not tolerated
Employees are rewarded for providing high quality products and services to
44.60
customers
Employees have a feeling of personal empowerment with respect to work
42.20
processes
Awards in my work unit depend on how well employees perform their jobs
39.80
Complaints, disputes or grievances are resolved fairly in my work unit
39.40
Creativity and innovation are rewarded
38.90
In my organization, leaders generate high levels of motivation and
37.80
commitment in the workforce
Promotions in my work unit are based on merit
33.60
In my work unit, differences in performance are recognized in a meaningful
29.70
way
In my work unit, steps are taken to deal with a poor performer who cannot or
28.60
will not improve
Pay raises depend on how well employees perform their jobs
21.70
Average score for this group of questions
48.47

16. Basu 16
It would be seen from Tables 1 & 4 that there is a positive difference of about 14% in the
average quality of perception of employees insofar as in favor of intrinsic motivation. It would
appear from responses to question nos. 1-7 that employees are accountable for their jobs and
hold their immediate managers in good esteem. However, responses to question nos. 8-22 speak
of low esteem for senior management that controls incentives and rewards and the pronounced
managerial biases on which these incentives are awarded to employees. The data also agrees
with the findings of the BPW survey, 2007 as shown in Table 5.
Table 5
Organization BPW/Performance Rewards & Advancement BPW/Effective Leadership Rank
NRC
1
1
SEC*
8
6
NASA
2
2
DoJ
18
9
DoS
3
3
NARA
16
21
DoT
28
27
DoE
26
25
DHS
29
29
SBA
25
28
* GAO that is ranked top second has not been considered since complete data is not available and SEC has been
moved up from third to second place.
Disconnect between leadership and performance rewards in the DoJ points to managerial bias in
distribution, or budget constraints for the organizations’ relatively low rating on performance
rewards. The impression one gathers is that of an ossified senior bureaucracy that is not far
different from many other countries similarly placed for the five lowest ranked organizations.
The data also principally is consistent with the types of managerial biases that have been
mentioned in the literature review elsewhere in this paper.
Like intrinsic motivators, large agency level differences are perceptible for which reason
this paper would now analyze the top five and bottom five agencies ranked in the BPW survey
2007. At the same time, the Nuclear Regulatory Commission’s (NRC) Employee Survey, 2007
shows that though 70% of employees believed that their performance appraisals were fair, yet
30% believed that pay raises were based upon performance (5). While, on the one hand majority
employees expressed their faith in their managers, yet less than half (49%) believed that
differences in performance were recognized in a meaningful way. At the same time 79% were
satisfied with their job – a pointer to intrinsic motivation being more important. At the same time

17. Basu 17
NASA’s agencies varied in their BPW response on fairness of rewards from 57.6% for HQs to
78.3% for the Kennedy Space Center. Similarly, units under the Department of Commerce had
BPW ratings ranging from 52.7% to 71.7%. For the DHS the BPW was a low of 32.7% but
ranged upward to 70.4% when all its sub-agencies were considered independently. Similarly, the
Department of Education had an overall BPW of 38.4% but ranged up to 57% including all its
agencies. The Department of Transportation with an overall BPW of 35.2% ranged up to 71.9%
when the Federal Highway Administration’s data was factored in. The fact of the HQs of these
departments exhibiting such low favorable responses toward rewards points either to higher
intrinsic motivation at the policy making and management level or else, at the other extreme, to
severe nepotism in the distribution of rewards or even inadequate budget support for reward
schemes.
However, the FHCS shows that across all the surveyed federal departments, only slightly
above a third (39%) of employees felt that they were rewarded for creativity and innovation, a
fifth (22%) felt that pay raises were related to performance, 40% believed that awards were
related to performance and less than a third (30%) felt that differences in performance were
recognized in a meaningful way. Thirty nine per cent felt that grievances were resolved fairly,
45% felt that arbitrary action was not tolerated and 48% believed that violation of a law could be
reported without reprisals. Even in these categories it is evident that more than half of all
employees believed that arbitrariness and reprisals were more the norm than the exception.
Adverse reactions to the quality of leadership also manifested themselves in a low 41% approval
of leader’s practices and policies while 64% trusted their managers. Surprisingly, five key BPW
measures – reward for creativity/innovation, promotions, rewards related to performance, dealing
with poor performers and fair pay raises ranked 64-84 on the 84-positive response list in the
FHCS with performance related pay coming in at 83rd position – indicator of the abject failure of
the merit pay system.
There is also a difference in BPW scores between headquarters and field offices within
organizations which shows that there are differences in the extent to which managerial biases in
performance appraisal occurs at various levels within an organization as shown in Table 6:

18. Basu 18
Table 6
Issue
I have trust and confidence in my supervisor
Promotions in my work unit are based on merit
Employees are rewarded for providing high quality products and services to
customers
Creativity and innovation are rewarded
Pay raises depend on how well employees perform their jobs
Awards in my work unit depend on how well employees perform their jobs
In my work unit, differences in performance are recognized in a meaningful
way
My organization's leaders maintain high standards of honesty and integrity
Average
HQs
65.70%
36.30%
Field
62.90%
32.30%
48.90%
42.70%
25.00%
42.10%
42.70%
37.20%
20.10%
38.60%
32.20%
53.20%
43.26%
28.50%
46.60%
38.61%
Part of the reason for the mismatch may lie in the fact that while participants generally trust their
immediate supervisor to assess their performance and contributions (71%), fewer participants
understood how the supervisor would rate their performance (63%), actually believed their
supervisor rated their performance fairly and accurately (62%), and that their supervisor was held
accountable for rating employee performance fairly and accurately (48%). Finally, a slender
majority trusted their supervisor to support them in pay and award discussions with upper
management (58%) – indicative perhaps of the control of top management over supervisors. In a
pay for performance system, upper management generally has a role in determining pay
increases, although the extent of this influence on individual pay raises varies widely. MPS 2005
survey data indicates that not even half of participants trusted upper management to fairly assess
their performance and contributions (49%) and refrain from favoritism (42%) in management
decisions. While many participants were not satisfied with the size of the award (57%), many
others were concerned with intangible aspects of the award or recognition—that it was not given
effectively (59%) or in a timely manner (48%). Two-thirds of participants reported
dissatisfaction with the way recognition and awards were distributed among their coworkers—
for instance, other employees received underserved recognition (75%) or that deserving
employees were left unrecognized (75%).
More employees were dissatisfied with the recognition and awards they received for their
work with only over a third (39%) of the participants being satisfied. Similar perceptions existed
for both supervisors and non-supervisors; non-supervisors were less satisfied with both pay

19. Basu 19
(59%) and recognition and awards (37%) than supervisors (70% and 50%, respectively). Overall,
fewer than half of supervisors believed their agency had the resources to reward high performers
(47%), and a slightly lower percent said they had the authority to actually draw on these
resources to reward high performance (43%). Thirty five per cent of supervisors and 43% of nonsupervisors said they would leave their agency on ground of unfairness and harassment – a
pointer to the prevalent strong managerial biases and employee perceptions of unfairness.
That funding for incentives also conditions employee disenchantment with extrinsic
rewards is evident from the MPS 2005 survey where 14 of the 24 agencies surveyed were
perceived by 50% of employees to have inadequate resources to pay rewards. This becomes
more apparent when one considers the fact of 57-67% of the Senior Executive Service (SES)
having received some form of reward during 2003-06 with some departments like Agency for
International Development (USAID) having raised the number of rewardees by as much as 42%
in a single year (OPM Table 4, 2006). This has naturally had fallout on the average amount of
rewards that ranged from 8.4-9.3% at “Outstanding” level, 3.3-5.4% at “Exceeds Expectations”
level and 0-1.6% at “Fully Successful” level, instead of a minimum 6-7% across the board as
suggested by Mitra, et al elsewhere in this paper.
Discussion
It is evident that extrinsic motivators are increasingly being seen as measures of control
even when employees are largely committed to their work and are reporting satisfactory
performance. That extrinsic rewards and incentives have been imposed on organizations by the
top management without much regard for performance appraisal systems is borne out by the
relatively poor ratings of senior management. Senior management is also seen by employees
pressuring supervisors into adopting extraneous considerations while distributing rewards and
incentives that perhaps explain why employees perceive the supervisor in a better light when
controlled for in intrinsic motivation; the perception of unfairness increases if controlled by
extrinsic motivators. The low rating of senior management also appears to affect the intrinsic
motivation of employees. Thus, DHS with an employee-skills match had a rating of over 71%,
and teamwork of 63%; yet effective leadership and performance-based rewards rated at 40% and
33% respectively. On the contrary, NASA reported employee-skills match rating of over 80%
and team work of 78%; yet effective leadership and performance-based rewards were rated at

20. Basu 20
62% and 58% respectively – a pointer to the limitations of a faulty and subjective appraisal
process.
The fact of extrinsic motivators figuring at the bottom of the list of fairness related
questions in all the surveys also shows that extrinsic motivators may harm the extant intrinsic
motivation by wanton discrimination between employees on extraneous grounds. Even in
organizations like NRC and NASA that were the two best places to work in the federal
government have relatively high perceptions of unfairness with regard to the distribution of
rewards and incentives. On the contrary, both these organizations have nearly three-quarters of
their employees voting them the best and second best places to work. This may be due mainly to
intrinsic motivation and commitment to the agency. Size of the organization (by employees) did
not seem to matter to perceptions of unfairness for appraisals and rewards and incentives since
the top five ranked agencies had employee strengths ranging from 3,000-102,000 while the five
lowest ranked agencies had 2,500-128,000 employees. Evidently, extrinsic rewards harm
intrinsic motivators and are even antithetical to the latter unless employees perceptions of
fairness in the distribution of rewards and incentives is raised and more objective and uniform
appraisal systems are put into place.
Directions for Future Research
Future research should be directed to designing new appraisal systems rather than
pontificating at length only upon the causes for the limited success of appraisals and the
distribution of rewards and incentives on this basis. While imposing an essentially private sector
concept upon public agencies may prove difficult primarily on account of the existing civil
service system, particularly in the federal government, yet the number of posts being changed
over to an unclassified system may require more extrinsic incentives to be built into the system
than at present. This may compensate the loss of job security and encourage enterprise and
innovation. At the same time research needs to focus on systems that would assure adequate,
although hitherto unconventional, adequate funding for rewards and incentives, perhaps as a
trade-off between a permanent and classified civil service and the need to maintain efficiency,
economy and effectiveness of governance with an unclassified system. Finally, research also
needs to be directed to training and development of managers for carrying out of appraisals and
also for measures geared to assure higher levels of managerial accountability.

21. Basu 21
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