I worked for the Army as they attempted to institute this idea through NSPS – performance based raises from within a pay pool. Great idea in thought, awful in practice. Federal managers didn’t know how to institute it and after years and millions, it was scrapped.
Government needs to reward top performers not just with monetary incentives but with quality work. Government (not unlike some areas of the private sector) needs to work especially hard to move more new (not just young – no age discrimination here) and rising talent into the right positions. Government, unfortunately, doesn’t embrace that kind of mobility and that as much as anything is a barrier.
Management and the thought process have to improve before performance measurement has any impact.