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This report contributes to the debate on incentivising public sector performance. It brings together the evidence on the effectiveness of sanctions and rewards (we commissioned Deloitte to conduct a review of the literature), summarises the results of our survey on their use in central government, and provides a practical guide on how to use them well. Discussions about how to lever greater levels of performance increasingly propose the use of these measures.

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A review of the literature, combined with our own survey and case study work, allows us to make a number of observations:

Our findings include:

  • The overall use of sanction and reward mechanisms is low. Only around 40 per cent of government programmes who responded to our survey reported using any form of explicit sanction or reward mechanism.
  • People in the public sector respond to sanctions and rewards, including financially based schemes, if they regard them as significant.
  • Sanctions and rewards need to be based around all significant aspects of performance, to avoid creating perverse incentives.
  • Schemes need to reflect a good understanding of the mix of motivations that many stakeholders will have.
  • Where performance, or the contribution of a given stakeholder,is difficult to measure, sanctions and rewards with dramatic financial or personal effects should be avoided.

If you would like to discuss this report or its findings any further, please feel free to contact us.

15 September 2008


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