A strong link between performance and rewards in the U.S. federal civil service could raise top performers to positions of power and responsibility and motivate employees to greater productivity. Federal employees, the general population, and scholars all express doubts about the strength of that link, however, though few have estimated it empirically. Using random-effects panel data models on a one percent sample of federal personnel records for 1988-2003, we examine whether performance ratings meaningfully influence promotion probabilities and annual salary increases. With an average annual promotion rate of 17.8 percent over this period, we estimate that employees with “outstanding” and “less than fully successful” ratings were one-fourth more likely and one-fifth less likely, respectively, to receive promotions than those with “fully successful” ratings. Average salary impacts were smaller but still significant. Patterns held up across agencies and stages of the federal careers. Performance ratings continued to affect career advancement one or two years later. We speculate on whether these links are strong enough to motivate performance and advance the most qualified federal employees.
Oh, Seong Soo and Lewis, Gregory B., "Performance Ratings and Career Advancement in the US Federal Civil Service" (2013). PMAP Publications. 8.