Journal of Organizational Behavior Management

ISSN: (Print) (Online) Journal homepage: https://www.tandfonline.com/loi/worg20

An Application of Pay-for-Performance in a Human

Services Setting

Adam S. Warman , Byron Wine & Rachel Ernest

To cite this article: Adam S. Warman , Byron Wine & Rachel Ernest (2020): An Application of Pay-
for-Performance in a Human Services Setting, Journal of Organizational Behavior Management,
DOI: 10.1080/01608061.2020.1819514

To link to this article: https://doi.org/10.1080/01608061.2020.1819514

Published online: 17 Sep 2020.

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JOURNAL OF ORGANIZATIONAL BEHAVIOR MANAGEMENT
https://doi.org/10.1080/01608061.2020.1819514

An Application of Pay-for-Performance in a Human Services

Setting
Adam S. Warman, Byron Wine, and Rachel Ernest
The Faison Center, Richmond, Virginia, United States

ABSTRACT KEYWORDS
Pay-for-performance systems have been found to be effective in Pay-for-performance; human
many settings and are more aligned with behavioral principles services; behavior analysts
than traditional pay schemes. Despite the potential benefits,
pay-for-performance systems have not been widely studied in
human services. The current applied paper details a pay-for-
performance program in a consulting department consisting
of behavior analysts. In addition to changes in net profit and
employee performance, aspects of development as well as
social validity measures are detailed.

In most organizations full-time employees are paid a fixed amount of money

in set intervals, typically bi-weekly. Providing money at set intervals has been
termed conventional pay (CP). Pay-for-performance (PFP) represents an
alternative compensation method whereby employees earn some or all of
their pay based upon meeting specified performance requirements. Despite
the fact that CP is more common, PFP has been recommended by behavior
analysts as more conceptually sound in that performance is tied directly to pay
(Abernathy, 1996).
As a field, medicine has widely adopted pay-for-performance paradigms to
determine reimbursement rates (Rosenthal & Dudley, 2007). In the behavioral
literature, there are examples in which PFP was shown to be successful and
applicable in a variety of industries where products are easily tracked.
Performance was superior when versions of PFP systems were implemented
with wait staff (George & Hopkins, 1989), machinists (Gaetani, Hoxeng, &
Austin, 1986), and those seeking to acquire job training skills (Koffarnus,
DeFulio, Sigurdsson, & Silverman, 2013). In a review, Bucklin and
Dickinson (2001) found that PFP systems resulted in improved performance
relative to CP systems. Despite the success of PFP there are very few examples
of it being applied in human service settings.
In a call for researching PFP in human services, Arco (1993) argued that
tying pay to the performance and outcomes of clients could make agencies
more accountable and responsive in regards to services delivered. In one of the

CONTACT Adam S. Warman awarman@faisoncenter.org The Faison Center, Richmond, VA 23230

© 2020 Taylor & Francis
2 A. S. WARMAN ET AL.

few examples of PFP in human services, Yates, Yokley, and Thomas (1994)
evaluated several different incentive plans in 23 therapists providing outpati­
ent counseling services. Results of the study suggest that some of the methods
were effective at increasing the number of therapy hours conducted and the
increased revenue offset the cost of the program; however, it is somewhat
difficult to draw conclusions because of a lack of repeated measures and
different durations of the interventions.
The paucity of PFP demonstrations in human services may be due to several
factors. First, human services organizations may work with underserved
populations and thus rely on grants, and unreliable or meager funding
streams, resulting in thin margins – some organizations may simply not
have capital to risk changing pay structures of employees. Additionally, data
exist suggesting that not all individuals prefer PFP over CP (Long, Wilder,
Betz, & Dutta, 2012). This preference disparity requires that managers attend
to how the PFP system is implemented and to the magnitude of the incentives
offered, taking care to offset other stressors in the system. If the results of Long
et al. hold true in human services organizations then opinions of employees
might preclude managers from developing PFP systems. Lastly, governmental
regulations, documentation, and other administrative burdens that do not
result in revenue but are nonetheless required may make PFP cumbersome
to adopt in human services. A decision must be made as to whether to
incentivize the employee time spent on such unbillable bureaucratic require­
ments. Despite the potential difficulties of PFP, the potential benefit of tying
compensation directly to performance warrant investigation. This report from
the field presents the results of a PFP system designed for a therapeutic
consultation service employing behavior analysts.

Method
Participants and setting

Participants were four Board Certified Behavior Analysts® (BCBAs)

employed at a behavioral health clinic providing consultation services to
adults diagnosed with developmental disabilities. All participants held mas­
ter’s degrees and three identified as female, while one identified as male.
Ages of the participants ranged from 28 to 37, with 2 to 12 years of
experience in behavior analysis. The behavioral consultation department at
the clinic generated revenue solely through hours billed to the state-run
Medicaid insurance. These hours occurred in homes, the community, and in
treatment settings such as day programs or skilled nursing facilities. Due to
the restrictions of the funding source, only licensed behavior analysts were
eligible to deliver services. Registered Behavior Technicians® were not able to
provide this service.
 JOURNAL OF ORGANIZATIONAL BEHAVIOR MANAGEMENT 3

Dependent variables

The first dependent variable was the aggregate monthly net income generated
by all four participants delivering the consultation service. Net income was
calculated monthly by the finance department by subtracting total expenses
from total revenue. The second dependent variable was the average number of
billable hours completed by the behavior analysts per month.

Design

An A-B-C design was implemented to evaluate two interventions. The lack of

reversal was necessary because delaying the implementation of the compensa­
tion changes for some behavior analysts would have led to the department
continuing to endure significant financial loss. Therefore, at the beginning of
a pre-determined month, all behavior analysts were moved to the process
intervention, and later the PFP condition, at the same time.

Standard pay condition

In the standard pay condition, each participant was paid a market-guided
salary bi-weekly. Upon hire general guidelines were provided to each behavior
analyst regarding the number of billable hours expected per week. The
expected weekly billable hours were 25, with the remainder of their full-time
hours to be utilized for non-billable activities such as intervention design,
collaboration with other behavior analysts, material creation, supervision
meetings, and obtaining authorizations. In order to determine how many
billable hours were expected, the organization examined hours spent daily in
other departments of the center and concluded that 5 hours per day of direct
service was achievable. An additional consideration was the determination of
how many hours would support the market salary of a behavior analyst in the
area. Each behavior analyst was assigned a caseload sufficient to achieve the
target number of billable hours. Due to the individualized needs of the clients,
which determined the number of service hours per week approved for them,
the number of clients per clinician to reach a sufficient caseload varied.

Assessment
Since the creation of the program in late 2018, the consultation service
experienced a pattern of monthly expenses exceeding monthly revenue.
Early on, group meetings were held with all behavior analysts to discuss the
importance of prioritizing service delivery alongside non-billable activities.
Individual behavior analysts were provided graphic feedback on their perfor­
mance and queried in an inductive format about barriers to completing
4 A. S. WARMAN ET AL.

expected service hours. Barriers to service delivery were recorded from the
interviews and themes were identified across the four behavior analysts. The
interviews indicated difficulty with client cancellations, lengthy unbillable
intake processes, variable driving distances between client locations, and
extensive amounts of time spent on re-authorizations with Medicaid. It should
be noted that the baseline condition occurred during the winter season, which
includes a number of holidays in the area where services were delivered and
sometimes an increase in illnesses causing cancellations in services.

Process intervention

In early February 2019, program administrators took steps to adjust the

identified processes. Although identified as problematic, re-authorization
activity necessarily remained with the behavior analyst delivering the services
directly; however, program administrators did take over all intake activity,
previously unavailable hours with clients at the separate on-site clinic were
made available to replace canceled appointments, and caseloads were redis­
tributed with geographic location specifically in mind (i.e., attempts were
made to group clients to minimize driving). These adjustments did not have
a substantial effect on delivered billable service hours, therefore administrators
designed and implemented the PFP system.

Pay for performance development

First, financial data were analyzed in order to determine the annual revenue
required by each behavior analyst to cover all costs associated with the
program. Costs included behavior analyst salaries, benefit allocations, paid
time off, holiday time off, portions of the salary for administrators in super­
visory roles over the program (i.e., a supervisor’s salary was covered in part by
the program they supervised), portions of the support and billing staff respon­
sible for finance, cost of office space, mileage payments averaged from the
previous six months, and office supplies averaged from the previous six
months. Administrators then designed a spreadsheet that calculated the
annual cost of a single behavior analyst.
Next, Administrators developed a formula to calculate a five-day average of
billable hours for each behavior analyst. The five-day average was calculated by
dividing the total hours billed in a month by the number of non-holiday
weekdays minus one day per eight hours of paid time off used during the
month and then multiplied by five. For example, a behavior analyst might bill
80 hours in a month with 21 non-holiday weekdays. If they used eight hours of
paid time off, the 80 hours is then divided by the 20 days they had an
opportunity to work, yielding a single day average of four hours. The one-
day average is multiplied by five to create a 20 billable hour five-day average
 JOURNAL OF ORGANIZATIONAL BEHAVIOR MANAGEMENT 5

for that behavior analyst. The five-day average was always rounded down (i.e.,
in the PFP system a weekly average of 22.3 hours would be recorded as 22).
The spreadsheet was then programmed to calculate the revenue generated by
a single behavior analyst based upon the five-day billable hour averages. The
analysis allowed administrators to see exactly how much the program was
costing the organization in relation to each behavior analysts employed, as well
as the revenue generated by each behavior analyst while accounting for the
total work opportunity.
The final step in development was to determine how much of the billable
rate would be shared with the behavior analysts. Senior administration
decided that once expenses were covered, 80% of additional revenue could
be shared with the behavior analysts which would allow the organization to
maintain sufficient reserves to operate.

Pay for performance condition

During PFP, the conventional pay arrangement was changed to the PFP
arrangement utilizing the described five-day average to augment the new
salary levels. Salaries were recalibrated and set at 85% of baseline. Then, 80%
of revenue for every billable hour in the five-day average beyond 20 was shared
with the behavior analysts. For example if a behavior analyst provided 90
billable service hours in the month with 20 work days, their five-day average
would have been 22. They would then have received 80% of the billable rate for
the approximate eight additional hours (e.g., two each week) they billed in the
four weeks of the month. The PFP system was calibrated such that if the goal of
25 hours per week was met, salaries would be equivalent to the baseline
condition; however, averaging more than 25 hours would result in a salary
larger than baseline. That is to say, if the clinician delivered the target 25 hours
on average, their compensation would be almost identical to the baseline
condition, but averaging higher than 25 would have resulted in increased
pay relative to baseline. The share of the billable rate was calculated on the
first day of the following month and the compensation itself was delivered in
the following paycheck on the 15th of the month. That is, the monetary reward
was delayed by 15 days following the end of the performance.

Results
The mean number of billable hours is presented in Figure 1. Across the four
behavior analysts between the months of November, December, and January,
billable hours averaged 15.5. During February, March, and April, when the
process intervention was in place, billed hours averaged 21.3. Finally, when the
PFP system was in place in May, June, July, and August, billed hours aver­
aged 24.6.
6 A. S. WARMAN ET AL.

Baseline Process Intervention PFP

30
Average Hours Billed per Month
25

20 Goal

15

10

Figure 1. Average number of billable hours completed by four behavior analysts per month.

Net profits for the consultation department are presented in Figure 2.

During baseline the program averaged a loss of 10,105 USD per month.
During the process intervention, financial losses decreased, corresponding
with the rise of billable hours, though an average loss of 2,505 USD was still
observed. During the PFP condition, average net income of 3,562 USD was
recorded. The change to a positive net income was sufficient for administra­
tion to justify continuing the program and providing the service.
After the PFP condition was in place for several months, all participants
were asked a set of questions about their experience with the new system

Baseline Process Intervention PFP

15,000

10,000
Net Profit per Month

5,000

-5,000

-10,000

-15,000

-20,000

Figure 2. Net profit generated by four behavior analysts per month.

 JOURNAL OF ORGANIZATIONAL BEHAVIOR MANAGEMENT 7

(Table 1). The questions were asked in survey format, to all four participants.
All participants agreed that they understood how to calculate their monthly
revenue share each month and that they could use the system to help plan
exactly how many hours they needed to bill to hit their self-determined billable
rate share goal. They also all agreed that it was important to them to contribute
to the program’s overall success. Half the participants agreed that the PFP
system improved their performance and three of four participants reported
that the goals of the system were clear to them. Two of the participants
reported that the system was stressful for them.

Discussion
At the most pragmatic level, the change to a PFP system removed the existen­
tial threat of dissolution from the consultation department’s future. Multiple
discussions were underway regarding the imminent closure of the program.
After posting significant monetary losses, the program was able to regain
solvency and continue to provide a valuable and necessary service to
a significant number of clients. The more traditional interventions of feedback,
redistributed duties, and schedule micromanagement were unable to create
a viable shift in revenue, whereas the PFP system was able to quickly bring the
service into a net revenue gain for the organization.
The billable service hours for each behavior analyst increased to nearly
25 hours per five-day period. The PFP recalibrated pay such that an average of
21 or more hours per week rendered the program profitable. So, while the
original goal was 25 hours per week, the PFP system made 20 the minimum

Table 1. PFP social validity survey.

1. I understand how to calculate my monthly revenue share each month.
Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree
2. I am able to use the revenue sharing formula to determine exactly how many billable hours I will need each
month in order to meet my target.
Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree
3. It is important to me that I contribute to the consultation program’s overall success.
Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree
4. The revenue sharing formula helps me with planning out my time each week.
Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree
5. Revenue sharing has helped me do my job better.
Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree
6. The goals of revenue sharing are clear to me.
Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree
7. The revenue sharing method has been stressful to me.
Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree
8. What other issues not addressed in revenue sharing need to be addressed?
Response:
9. How did the results of revenue sharing impact your job?
Response:
8 A. S. WARMAN ET AL.

and 25 as the goal for behavior analysts to receive their pre-intervention salary.
In baseline 25 billable hours per week would have been fiscally sustainable (i.e.,
it is the rate at which behavior analyst compensation was equal to their
previous salary under the standard pay condition). Had the subjects per­
formed at that rate prior to the PFP condition, it is likely that the change
would not have been necessary. Due to the PFP structure, the participants had
access to significant billable rate share at rates above 20 hours per five-day
period. For example, at 30 billable service hours per five-day period, behavior
analysts would see a 26% increase in their salary relative to the baseline pay.
Despite this opportunity, none of the participants ever logged a month with
rates higher than 25 hours per five-day period. The compensation received in
both conditions, then, is almost exactly the same for all participants. Despite
no significant change in compensation, the number of hours billed increased
relative to baseline. The observed increase in hours appears to be a result of the
contingency created by the PFP systems as opposed to the amount paid, as has
been noted by other researchers (Bucklin & Dickinson, 2001).
In some organizations, including the company in this study, administrators
analyze fiscal performance on a monthly basis. The revenue share compensa­
tion in this system was paid to the behavior analyst during the month follow­
ing the performance. Therefore, changes in behavior may not prove financially
viable until the following month. This delay in when the costs are attributed to
the program in the accounting system must either be redistributed to when the
costs were actually incurred or the administrative team analyzing the financial
data must take a longer fiscal view than the monthly income. Additionally,
delays in payment of rendered services due to authorizations and processing
are also possible. The aforementioned variables can be seen in May and August
of 2019. In May, some back funding was received, at least a portion of which
should have been collected in April. In August, some funds were delayed until
September.
It is worth noting some practical considerations that became apparent in the
development and implementation of this system. The setting in which this
study was carried out employed an accounting professional and multiple
additional finance support staff who were able to provide the investigators
with detailed information about expenditures; however, it took a significant
amount of time to correctly identify and attribute all necessary costs to the
program. When employing full-time clinical program staff at a competitive
salary with payroll benefits and a supporting administrative team, these costs
include not only the behavior analyst salaries plus billable rate share, but also
additional costs to clinical programs, including employee insurance costs,
organizational insurance, supervisory salaries and benefits, support staff sal­
aries and benefits, holiday pay, paid time off, continuing education costs,
licensure fees, mileage reimbursement, office supply costs, and physical
space in which to work. When calculating predicted revenue, one must also
 JOURNAL OF ORGANIZATIONAL BEHAVIOR MANAGEMENT 9

take into account weather delays (e.g. snow closures) and cancellations, holi­
day closures, and the varying number of potential billable days in each
month – these complications necessitated using the 5-day average for each
behavior analyst. Additionally, while setting the percentage of billable rate
share in a PFP program may sound like a simple exercise in choosing any
number lower than 100%, the details of the cost of running the business must
be taken into account (e.g., investment in expansion, administrator salaries,
reserves, etc.). Lastly, in terms of development, it was determined that perfor­
mance dropping below an average of 20 billable service delivery hours per five-
day period would necessitate disciplinary action and performance improve­
ment plans because fewer than 20 hours would result in financial unviability
even with decreased base salary levels. The implementation of disciplinary
action was not required in the current system, but it should be accounted for if,
as in the current PFP program, any portion of compensation is not completely
dependent upon performance.
Further, with the limited prevalence of PFP systems in practice, employees
are often not familiar with how such a system operates and may be reluctant to
participate in it. Each of these participants was a behavior analyst, and thus
possessed at least cursory knowledge of organizational behavior management
practices. Even so, multiple information sessions and private meetings were
necessary to assuage concerns and explain how the system would affect their
compensation, work schedule, and employment expectations. All four parti­
cipants were already employees of the organization within the consultation
department and so this report does not include any data on the effect of a PFP
system on the recruitment of new employees. It’s possible that the lower base
salary could serve as an impediment to recruitment of talented new behavior
analysts, or possibly even as an asset to recruitment as some potential employ­
ees see the opportunity to increase their salary.
The introduction of a PFP plan in a human service context does raise an
ethical consideration. In the current plan behavior analysts made more money
only when they billed more hours. In such circumstances an organization
should be concerned with both quality of services provided and the potential
for fraud. While no organization would like to think professional employees
capable of engaging in fraud, purposefully connecting pay to work could
encourage such activity. In the current PFP program several safeguards were
taken. First, all clients, or a representative, signed when the behavior analyst
arrived and left the setting. Second, a senior behavior analyst was assigned to
review cases and, if needed, conduct occasional unannounced drop-ins during
scheduled sessions. No instances of fraud were noted – and none were
expected – but it would have been irresponsible to simply ignore the
possibility.
It is also worth noting that when asked how revenue sharing impacts their
job and what other issues not addressed in revenue sharing needed to be
10 A. S. WARMAN ET AL.

addressed, participants reported that some of the struggles from the conven­
tional pay condition continued to impact their ability to deliver service hours.
Latency in client authorization and re-authorization continued to impact
service delivery, as well as client cancellations (either by client choice, illness,
or mental health hospitalizations). They also reported that the travel time to
distant client locations impacted their service delivery.
It must also be noted that two of the four participants found the PFP
condition stressful. This is an important finding given that the effects of stress
related to work-place incentives is not well understood (Ganster, Kiersch,
Marsh, & Bowen, 2011). They noted that the consultation job made them
feel isolated from practitioners in other departments of the company and that
when they take advantage of professional development activities such as
conferences and workshops, they felt that they are missing out on time they
could be earning billable hours. When determining whether to attempt the
implementation of a similar system, organizations must be careful to take
employee satisfaction with work conditions and compensation into account.
In this situation, while they preferred the conventional pay arrangement, that
arrangement simply was not sustainable as a functioning business model. The
organizational setting of this report was a 501c (3) nonprofit organization, so
the main motive was providing services rather than profit. But even without
a profit motive as the driving force in an organization, it was vital for fiscal
accountability to be present at the administrative and board level in order for
the mission to continue. In already profitable organizations, management
must strive to use PFP and other behavioral technologies ethically.
The current report from the field presents a model for how a human service
organization could incorporate PFP. The system was effective in at least
maintaining solvency, and perhaps accelerating growth, in a program so that
the organization could continue to provide a needed service in the community.
It should be noted that the profit margins were thin and an organization
relying solely on the revenue from this program might have difficulty when
inevitable unexpected expenses arise. Given relatively thin profit margins,
more research is needed on how best to implement PFP in human services,
especially for improving employee behavior that does not directly increase
revenue (on-time arrivals, cleaning therapy rooms, quality of instructional
trials). In addition, it is important to couch these results in the knowledge that
they are from a report from the field, so more rigorous and purposeful
consideration of the variables in other situations is necessary before wide-
scale implementation of the practices.

Disclosure statement
No potential conflict of interest was reported by the authors.
 JOURNAL OF ORGANIZATIONAL BEHAVIOR MANAGEMENT 11

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