Capacity Development Strategies

Incentives and capacity development

Links between incentives, civil service reforms and capacity development – a new focus for governments and development partners.

By linking incentives and personal motivation to specific organizational objectives, public organizations can move from a vicious circle of capacity erosion to a virtuous cycle of economic growth and bureaucratic efficiency. Incentives have been identified as “the missing link” (Ul Haque, 2006), or as the “the missing sector in sectoral studies” (McLeod, 2005). In fact, making “incentives and motivation converge in order to create capacity development” is one of UNDP’s fundamental principles (Lopes, and Theisohn, 2004). Focusing on incentives implies expanding the notion of typical capacity development modalities beyond that of training. As one author puts it, “the problem lies not in the lack of skills, but the lack of strong incentives to use these skills optimally” (Kamoche, 1997, p. 4). Incentives should therefore correspond to the objective of fostering a high-performance public service that attracts, retains and motivates competent staff (World Bank, 2008a, p. 6).

  • Incentives, such as merit-based pay and promotion, evaluations and a transparent working environment, can create competition and accountability.
    • Authors generally make a distinction between individual and organizational incentives on one hand, and financial and non-financial incentives on the other. Individual rewards, or benefits, are identified as the main incentive for behavioural change. Financial incentives are used in the public service to reward civil servants, mainly through salaries and monetary allowances. Non-financial incentives are “incentives that involve no direct transfers of monetary values or equivalents” (Mathauer, et al., 2004, p. 4); they may be merit-based or linked to accountability issues, such as citizen’s charters or service delivery surveys. The challenge is to “establish an optimal mix of financial and non-financial incentives that generate the desired behaviour” (Hongoro, and Normand, 2006, p. 1313). Organizational incentives strive to make individuals internalize the organization’s goals. The institutional and context level may indirectly create incentives for performance for both individuals and organizations, such as institutional and cultural norms and values.
  • Capacity erosion, poor public sector performance and weak incentives for civil servants – the situation in many developing countries.

      The importance of incentives has been recognized for a long time but the impact of reforms in the 1980s and 1990s has been limited. In fact, UNDP argues that “the incentives structures of public administration in most developing countries are known for their counter-productive effects on staff morale and efficiency” (Lopes, and Theisohn, 2004, p. 99). In most developing countries, unjust recruitment and promotion and low salaries represent a major capacity challenge. Often, learning is not implemented because of obstacles related to power structures within an organization, entrenched attitudes or lack of resources (World Bank, 2008b). Donor involvement, especially through technical assistance, has focused extensively on the training of civil servants as a major strategy for capacity development. Generally, authors agree that the value of non-financial incentives has been underestimated, that there is a lack of knowledge about how incentives really work, and that they should be matched to the specific context in which they are being implemented.

  • The civil service should be an instrument for, and not an obstacle to, capacity development.

      Well-designed incentives encourage individuals to seek out training, motivate them to apply their skills, and enhance their performance in the working place. From an emphasis on pay reform to merit-based reform, current reforms emphasize the accountability dimension of public sector organizations. Training to strengthen human resources, restoring meritocracy, improving competitiveness, and mobilizing additional resources are  a few of the additional reform elements that put the issue of incentives at the centre of civil service reform. These may be introduced though a strategic human resources management approach that also aspires to create a supportive organizational environment to reinforce the applied incentives. Non-financial incentives must accompany financial ones, and require a deeper change in values and attitudes. For such a change, reforms and incentives must target both performance and accountability, at the individual, organizational and institutional levels. The political and socio-economic context must be taken into account, such as the desire for change, and the groundwork must be well prepared for reforms. In addition, progress must be monitored and its benefits continually evaluated.

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