October 2007

Intense competitive pressure and the need for continual improvements have led to a burgeoning interest in and use of pay-for-performance programs. This paper explores the increased use of pay-for-performance, drawing examples from healthcare, education, and the government. Suggestions are made as to how best to implement pay-for-performance programs, while drawing attention to key implementation problems. The author suggests that pay-for-performance programs will be enhanced by greater research and experimentation, as well as an increased emphasis on initial design. Specifically, practitioners need to be wary of common design problems, including difficulty in measuring performance, limited funds for payouts, and perceptions of unfairness.

To read this paper, please click here.