Pay For Performance

Pursuant to a congressional request, GAO examined: (1) whether and to what extent state governments operated pay-for-performance compensation systems; (2) the problems experienced by those systems and their similarity to those experienced under the federal government's Performance Management and Recognition System; and (3) the extent to which foreign countries used pay-for-performance systems.

GAO found that: (1) 23 states indicated that they used pay-for-performance systems; (2) 14 of the 23 states implemented their systems within the last 10 years, and at least 3 other states indicated they were either studying or actually implementing a pay-for-performance system; (3) most of the states used annual employee performance appraisal review systems for their pay-for-performance systems; (4) 21 of the 23 states required the establishment of performance standards to measure employees' actual job performance; (5) in many of the states, employees and supervisors jointly developed work standards; (6) all 23 states had a payout system for performance awards which based award on the employee's performance; (7) state funding information showed some variance as to whether and at what amounts states were funding their pay-for-performance systems; (8) the average annual performance award for eight states ranged from a low of about $400 to a high of $2,831 per employee; (9) 63 of the 75 state employees interviewed believed that inadequate or inconsistent state funding sometimes hindered or undermined the system's goals; (10) the Organization for Economic Cooperation and Development (OECD) reported that 13 of its 24 member countries operated performance appraisal systems of some type in the public service; and (11) OECD countries' pay-for-performance systems varied in employees covered and in appraisal and payout components.