Successful Diffusion of a Failed Policy: The case of pay-for-performance in the US federal government

Pay-for-performance (PFP) is a popular management approach that came out of the business sector and was adopted as a centre piece of the 1978 US Civil Service Reform Act. An extensive set of studies assess PFP as largely unsuccessful in the federal government, and many of the private sector studies also found problems in PFP in the private sector. Yet, PFP continues to be adopted by governments in Europe, the United States and Australia. Our study examines the original adoption of PFP in 1978 to assess why it diffused so readily from the private sector to the federal government. We find PFP as a good example of Kingdon's (2002) garbage can decision making in which the policy champions presented PFP as a rational policy solution to widely perceived performance appraisal and reward problems at an opportune time. The PFP was trumpeted as an innovative policy but had almost no systematic evidence of success to support its use. Indeed, the problems of private sector PFP were diffused to the public sector. This case study underscores the lack of evidence-based decision making on an important presidential human management agenda, demonstrates an example of policy adoption based on myth rather than fact and concludes that better human resource management theories built on assumptions and public service motivation pertinent to the public sector are needed.