With the Obama administration close to making decisions about the fate of pay for performance in government, I was interested to come across a summary of research about the approach’s effectiveness in improving overall organization performance, and I found there is relatively strong evidence for a generally positive effect. The study — “Pay and Performance: Individuals, Groups, and Executives” — is in the most recent Academy of Management Annals, which is published each year by the Academy of Management, the primary association of professors who study organizations. The paper is by Barry Gerhart from the University of Wisconsin, Sara Rynes from the University of Iowa (and former editor of the prestigious Academy of Management Journal), and Ingrid Smithey Fulme from Georgia Tech.
Kelman, Steven. "The Case for Pay for Performance." Federal Computer Week. September 23, 2009.