Revisiting Crowding-Out Effect of Performance Management: Its Impact on Extrinsic and Intrinsic Motivation

Abstract

Scholars have believed that motivation crowding out will occur when performance-based personnel management is practiced in the public sector. However, drawing on a more sophisticated typology of human motivation, this study demonstrates that the provision of extrinsic rewards can motivate, rather than demotivate, public employees even if public employees have strong public service motivation. Analyzing the data from the Federal Employee Viewpoint Survey (USA), this study found that the practice of employee performance management increases work effort and job satisfaction, and that such effects were mediated mainly by the hybrid motivational mechanisms (i.e., via enhanced self-concepts and perceived fairness), rather than by increasing sheer extrinsic motivation. This implies that the practice of employee performance management can be effective in motivating public employees.