I have reproduced a response I wrote to another article as it sets out the arguments on payment by results. Next I will have a go at when and how to use different types of PbR…
This premise is flawed. Performance related pay and payment by results are not based on the same assumptions, and are not used to solve the same issues.
I agree that performance related pay in social contexts is typically counterproductive. Research indicates that work motivation has little to do with money, instead being focused around a sense of autonomy, the potential to grow in competence and master ones chosen field, and a sense of purpose in what one is doing. Teachers, firemen, social workers and therapists are all people who we hope are doing a good job because they care about the people they are supporting or providing a service to. Performance related pay can add stress and tends to motivate those motivated by financial reward, in other words, not the people you want doing the job
This has nothing to do with payment by results or Social Impact Bonds, the model that Social Finance developed and is pioneering in Peterborough. Social Impact Bonds are not built around the simple assumption that economic incentives will boost performance. They focus instead on the idea that government is paying for desired outcomes which are agreed upfront. This allows providers greater flexibility to innovate and develop more effective solutions. It also means that government can take greater risks, trying things to see if they will work, and only paying if they do. By delivering pre-agreed and clearly defined outcomes, there is a powerful alignment among those responsible for delivering the interventions.
In this they acknowledge that many government contracts had in an effort to ensure accountability, become bureaucratic, providing detailed input and process targets that over time ensured service providers were focused on the needs of their paymasters, not their service users. This is an opportunity to move things back the other way.
We developed the Social Impact Bond to encourage more preventative, positive interventions commissioned by governments that historically have struggled in this area. It is still early days, but judging by the wide scale interest in the model from across the political spectrum there is potential for it to do just that. This would enable significant improvements to many people’s lives, particularly those at the margins of society.
There will be both effective and ineffective payment by results programmes developed over the next period. It is in many of its incarnations an emerging field. But using accurate concerns about performance related pay to make sweeping generalisations about payment by results runs the risk of marginalising a model that is key to enabling social innovation and positive social change.