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The article focuses on the effect of incentive to the improvement of public sector management. It states that reform on the public management that is based on principal agent theory and private management recommends pay-for-performance. It says that the hypothesis was applied in the performance management system that was introduced to the central government of Denmark. It says that based on the system, heads of the government agencies are given bonus based on their performance of their agency. It concludes that reform is not possible based on the private sector experience and bureaucratic theory.