What is Public Service Motivation (PSM) in the context of civil servants?

Written December 2022

Summary

PSM can drive performance in some public institutions. Principals can rely on the inherent self-motivation of the employees with PSM to achieve their desired outcomes. They can also recruit more people with PSM through mission-matching. However, it is not a 'magic wand' as not all public organisations are mission-oriented, and there could be inherently self-interested civil servants who do not respond to enhancements in PSM.

Enhancing PSM can improve the performance of public institutions for those intrinsically motivated employees. Increasing non-financial extrinsic motivation, like social recognition, can help improve PSM and public institutions' performance.

Principals of the public organisation must also consider external financial rewards to improve performance, given information asymmetry on the motivation and behaviour of civil servants. However, public organisations' complexity and goals ambiguity could dampen the effects of financial incentives on performance. Principals must also consider the potential distortionary behaviours of agents when designing financial incentives.

The rest of the article is structured as follows; I will first attempt to define PSM and then use the principal-agent theory to argue how the principals can leverage PSM under the some types of public organisations. Next, I will discuss PSM with respect to the types of civil servants, knights and knave, followed by complexities that may arise in practice. Finally, I will explore how principals can use other tools like financial rewards to boost performance, which has advantages and disadvantages.

PSM is a useful concept for understanding intrinsic motivations in organisations

PSM can help organisations understand employees' intrinsic motivations, although there is no clear definition in the literature. The early part of the literature attempted to define PSM as unique to public organisations. Perry and Wise (1990) described that an employee's predisposition to act upon the sense of duty to the public is only in public organisations. However, the literature expanded the narrow view of PSM when Vandenabeele (2007) described it as behaviours or values beyond self and organisational interest as individuals strive for goals that benefit a wider group. In essence, the word 'public' in PSM does not refer to the type of organisation but addresses the larger population. While losing the sector-specific nature of the term muddles its differentiation with simple altruistic and prosocial behaviour, it is still a useful concept linked to employees' intrinsic motivation in the context of public and private organisations.

PSM is more prevalent in public organisations vs private

However, PSM is more commonly associated with public organisations than private firms. Perry, Hondeghem, and Wise (2010) mentioned that while PSM is not unique to public organisations, it is more prevalent in the government. Governments have mandates that are more explicitly related to public service and general improvement for the population. The explicit commitment to the public may attract employees with PSM who place more importance on the altruistic or prosocial nature of government jobs.

Principals in public organisations can leverage PSM to achieve their objectives, thereby driving organisational performance

The principle-agent model is a fundamental theory in management. A principal is usually someone in-charge, and an agent carries out the output to achieve the outcome desired by the principal (Wilson, 1989). Public service principals aim to deliver a public service that is "efficient, responsive, accountable, equitable, and of high quality” (Le Grand, 2010, p. 58). The least would be to avoid shirking among public servants (Wilson, 1989). The principal's success is synonymous with that public institution's performance (Wilson, 1989).

Principals in public organisations can rely on the inherent self-motivation of employees with PSM to achieve their goals. PSM is relevant, especially in the craft type of organisation, where it is more goal-oriented (Wilson, 1989): Its output is difficult to observe, but the outcome is visible, like the military and investigative agencies. In this case, the principals would have to trust that the agents, by all means, will align their actions to produce output that will reach the principal's desired outcome. Should the agents have PSM and believe in the goals organisation, there are high chances that they will achieve the necessary output by default because they are inherently motivated to do so. PSM can drive performance. There are also other types of organisation, like procedural, production, and coping, as described by Wilson (1989), that may require other means of control, like continuous surveillance, to achieve the output. Nevertheless, employees with high PSM will help with performance in any type of organisation as they are intrinsically motivated individuals.

While mission matching can recruit employees with PSM, not all public organisations are mission-oriented.

Principals can improve performance in public organisations by hiring more employees with inherent PSM. They can do it through mission matching at the point of recruitment. Mission-oriented sectors typically attract more motivated agents as they perceive intrinsic benefits from doing so (Besley & Ghatak, 2005). Public organisations are more synonymous with the mission-oriented sector than the private sector, which is generally more profit-oriented (Besley & Ghatak, 2005). Public organisations with a clear mission will be able to attract more motivated agents to pursue their goals as employees' values and organisational goals are aligned. Consequently, governments can perform better as the agents are intrinsically motivated to do their best.

However, it is worth noting that "not all activities within the public sector are mission-oriented", and it will be more challenging to attract intrinsically motivated agents in those areas (Besley & Ghatak, 2005, p. 616). Even organisations with mission-matching could face some negative effects through bureaucratic conservatism as employees can resist changes (Lecture 4, slide 19).

PSM is more relevant to knights and not knaves

In theory, there are two types of public servants: the knights and the knaves (Le Grand, 2003). A common perception of civil servants is that they are motivated by altruism to serve the public, the knights (Le Grand, 2003). Knights are the group of people that are associated with PSM. They are trusted to deliver high-quality service by nature and derive a sense of purpose from the warm glow of going above and beyond by self-sacrificing for others (Le Grand, 2010).

By contrast, the opposite of knights is knaves. They are inherently self-interested (Le Grand, 2003). Should they choose to exert effort, there must be something in it for them as well. The benefits for others or the public, if any, are seen as positive spillovers. Therefore, it is by definition that the knaves will not possess PSM as they will not be interested in going beyond self-interest to fulfil a larger goal.

Principals can enhance PSM for knights through non-financial extrinsic motivations.

Principals can enhance PSM for the knights by improving their extrinsic motivations that are non-monetary in nature - the sense of identity, fairness, and recognition (Le Grand, 2003). For example, recognition from the outside world can reinforce the altruism of knights (Ali et al., 2021). Symbolic awards providing social status and recognition can significantly affect job performance (Lecture 5, slides 12 and 13). Kosfeld and Neckermann (2011) found that even a simple congratulatory card for best performance can improve performance by about 12% on average. Not only are principals able to improve performance, but they can also do it cost-effectively.

However, some may argue that the knights who respond to extrinsic motivations like social status engage in prosocial behaviour and are not purely self-sacrificing agents with PSM (Bozeman & Su.,2014). While it is important to study this distinction, it might not matter much for the principals as long as it does improve performance or does not crowd out the knights or the knaves. The knaves might not be crowded out as they, too, could derive some utility from social recognition, perhaps for self-glory purposes. However, further study needs to be conducted to determine if knaves respond to social recognition like knights or if they are crowded out.

However, knights and knaves are not binary distinctions in practice, making PSM-related incentives context-dependent.

In reality, the classification of knights and knaves is continuous rather than dichotomous and could be dynamic (Le Grand, 1997). A person can be equally a knight and a knave simultaneously, in the middle of the spectrum. These classifications are not static, as various aspects influence knightly and knavish behaviours. While people are inherently knightly or knavish is attributed to individual traits, specific incentives can push people to behave in a more knightly or knavish manner. Therefore, it would be difficult for principals to tailor PSM-related incentives as people's behaviours can change depending on context.

There can be more knaves than knights in public organisations, which makes enhancements in PSM ineffective in improving performance.

Unlike mission matching, which sets to hire inherently motivated employees with PSM, some recruitment practices can attract more knaves into the organisation. For example, in Malaysia, preferential treatment for the majority race in hiring and career progress in public service is enshrined in the constitution . This preferential treatment seems to attract more knavish characters as they cite material rewards as the most significant pull factor to be civil servants: Job security (including lifetime pensions), fringe benefit, and low job stress are among the top reasons (Woo, 2015). These extrinsic motivations do not satisfy the definition of PSM, and they make up about 90% of the civil service in Malaysia (FMT Reporters, 2022). Although the primary reasons for joining the civil service seem to be for knavish reasons, we cannot categorically rule out that those from the preferential group do not possess any PSM, as context would also matter.

At the same time, there could also be civil servants with high PSM, especially among those from the non-preferential group who choose to join the government. Those from the non-preferential group who are discouraged from applying to public service cite poor job prospects as the primary reason (Woo, 2015). Despite the lack of career prospects, some still apply, making up about 10% of the civil service in Malaysia (FMT Reporters, 2022). They must have strong PSM, as limited job prospects do not deter them. However, people from the non-preferential group could also choose to join the civil service for knavish reasons. Since representation from the non-preferential group is decreasing, there could be career prospects for diversity reasons, especially in the top positions. Joining the civil service under this motivation would be for strong knavish reasons. Nevertheless, this motivation might only attract some high-risk takers.

In situations where there are knaves in public organisations, and in the Malaysian case, knaves can potentially be the majority, enhancing PSM may be ineffective in improving performance. Only a subset of employees will respond to it.

Due to information asymmetry, principals may not know who the knights and the knaves are.

There will be some information asymmetry between principals and agents, which could affect the efforts to enhance PSM to improve performance. In reality, principals will not know who among their agents are knights, knaves, or both, especially in the case of Malaysia, where preferential treatment adds another level of complexity. Moreover, hidden information from the principals can lead to an adverse selection of agents (Le Grand, 2003). For example, if the principals are looking for employees PSM with mission matching, agents can lie about their motivations and be recruited. However, the principals might not be aware of this mismatch. When the principals try to improve performance by enhancing PSM, they might not achieve their intended outcome as they have employed knaves.

Principals cannot only rely on PSM to boost performance. They also must use financial rewards to improve performance.

With information asymmetry and knaves in public organisations, principals cannot solely rely on the agents' inherent self-motivations. They must use other tools, such as financial rewards, to align the agents' incentives to achieve the principals' desired outcomes. Since the motivation for joining the public service differ significantly for knights and knaves, their response to incentives and rewards would also differ. Knaves respond well to price effects like pay and job security and place greater importance on career prospects and autonomy (Le Grand, 2003). However, knights would be less attracted to financial rewards and place more importance on recognition and identity as civil servants (Le Grand, 2003).

Performance-based incentives were adopted in the public sector during New Public Management era in the 1980s to increase performance mimicking the private sector practices. Fundamentally, a person who does more and better than others will receive bigger rewards, which will trigger extrinsic motivation to improve self-performance and hence, the public institutions (Ali et al., 2021). Financial rewards such as bonuses, salary increments, or promotions fall under external incentives to drive performance, and knaves generally respond well to these rewards (Le Grand, 2003).

Tasks with simple and measurable targets, like in a procedural type of organisation, may allow principals to design incentives that effectively reward productivity (Wilson, 1989). When the output is clearly observable, its value will allow the principals to reward the effort accurately, inducing a Pareto efficient level of effort (Burgess & Ratto, 2003). Performance-based rewards have worked well in the healthcare and education sectors in Rwanda and the US, respectively (Ali et al., 2021).

However, given the complexity and ambiguity in the public sector, performance-based rewards may not always work.

An OECD study found that the performance-based incentive has no empirical evidence that it improved the performance and motivation of civil servants as some characteristics of the public sector dampen its effects (Weibel et al., 2010). The public sector delivers complex services and products, where even outlining measurable targets may be difficult or unrealistic in some cases. For example, in coping organisations where output and outcome are difficult to observe, designing a performance-based reward system will be challenging, if not impossible (Wilson, 1989). Agents in the private sector are also decision-makers and lack a single, clear goal, unlike in the private sector (Burgess & Ratto, 2003). They try to maximise multiple objectives like equity and efficiency, while the private sector agents are primarily only interested in value maximisation (Burgess & Ratto, 2003). Complexity and ambiguity in goals are two examples of characteristics common in public organisations that affect the effectiveness of performance-based rewards in governments.

Financial rewards can adversely affect the organisations through crowding out of knights with PSM.

Rewarding someone with a monetary incentive to do something they already enjoy doing intrinsically could negatively affect the organisation as it might crowd out intrinsic motivation (Weibel et al., 2010; Ali et al., 2021). The knights find it demoralising when the incentive schemes promote self-interested behaviour closely associated with financial rewards (Le Grand, 2010). Should the principal design reward systems with a heavy emphasis on financial motivations, it will crowd out the knights. Worse, "the knights become knaves" as "extrinsic motivation drives out intrinsic motivation" for them (Le Grand, 2010, p. 59). The knight's warm glow, self-sacrifice, and willingness to go above and beyond are replaced with extrinsic motivations, usually financially related. This loss of intrinsic motivation will have to be compensated with more external rewards, increasing the overall cost for the organisation (Weibel et al., 2010).

Performance is not guaranteed, even with costly financial rewards, given other principal-agent issues

Having costly financial rewards would still not guarantee principals' desired outcomes, as agents can take advantage of the system. Since extrinsic financial rewards cater to the knaves, they are prone to gaming and dysfunctional behaviour, which might derail the objectives set out by the principals (Burgess & Ratto, 2003). Courty and Marschke (2004) reported some evidence that financial incentives can distort agents' behaviours to take advantage of poorly designed reward systems. While some argue that these costly distortions merely reflect poor incentive designs, there are no counterfactual behaviours of those agents in good designs (Courty & Marschke, 2004). They could still find a way to game the system. These distortionary behaviours show how costly financial rewards would still not guarantee performance. Principals should design financial incentives without giving the benefit of the doubt that their agents will not game the system.

Conclusion

Although there is no clear consensus in the literature on the definition of PSM, it is a useful concept to understand motivation, especially in the context of public institutions.

PSM can be effective in improving the performance of some public institutions. Principals in public institutions can leverage PSM to achieve their desired outcomes by relying on the inherent self-motivation of individuals with PSM. They can also recruit more people with PSM through mission-matching, but not all public organisations will be mission-oriented.

Enhancing PSM among knights through non-financial extrinsic motivation can improve the performance of public institutions. For example, social recognition can reinforce altruistic motivations for the knights in cost-effective ways. However, further study needs to be carried out to test if knaves also respond to non-financial extrinsic motivation for self-interest purposes.

There can be knaves in public institutions who do not respond to enhancements in PSM as they are inherently self-interested people. Furthermore, due to information asymmetry, principals will not know who the knights and the knaves are. The principals will also have to use other tools, like, financial rewards, to motivate the knaves to improve the performance of public institutions.

Financial rewards can improve the performance of the public sector, and it has worked in some cases around the world. Nevertheless, there is also empirical evidence that it may not work, given the complexity and ambiguity of public institutions. It can also increase the cost to the organisation as it may crowd out the intrinsic motivation of the knights. Even then, costly financial rewards may not guarantee improved performance as the agents could game the system. Principals must consider potential distortionary behaviours when designing financial incentives.

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