Do you think that the efficiency of bureaucratic performance in the country can be promoted through high-powered financial incentives ? Examine. (200 Words)
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Enrich the answer from other sources, if the question demands.
IAS Parliament 4 years
KEY POINTS
· Evidence supports the deployment of high- powered incentives for transforming the bureaucracy from an albatross around the public’s neck into an engine of growth.
· Targets and performance measures can be changed as per the changing needs of the public/state. The incentives can also be tweaked and fine- tuned over time.
· For example, a bureaucrat in a more visible function may be more risk-averse (due to the higher cost of visible failures) than one in a less visible role.
· Financial incentives allow for heterogeneous risk preferences and targets. Various functions and departments can have incentives designed specially for their performance objectives.
· In a system with well designed financial incentives, ‘good’ bureaucrats will earn more, be more visible, and face high demand for their skills.
Challenges
· For this system of contracting to work in a government setting, performance will have to be objectively defined.
· A clear link between effort and performance metrics will have to be established, and bureaucrats will have to be given ex-ante knowledge of these metrics.
· Incentives will also have to account for the randomness of outcomes, the risk aversion of public servants, and the fact that results may depend on inter-departmental cooperation in several cases.
· The challenges of tracking and evaluating performance could be surmounted through a thoughtful application of technology.
