Do common intuitions about the role of red tape and pay-for- performance apply generally to bureaucracies in the context of a developmental state? In the public administration literature, red tape (defined broadly as formalised constraints on bureaucratic decision-making) has been identified as a factor for low organizational performance and employee outcomes. Similarly, performance pay contracts are theorized to induce higher effort levels in public servants. Despite this, why is there a prevalence of red tape and low-powered contracts in developmental state bureaucracies? This paper argues that the general theories of public sector efficiency are based on advanced bureaucracies and fail to account for the specific exogenous constraints faced by developing countries; the elimination of red tape and establishing high-powered incentive contracts may lead to lower performance than the status quo. I model a setting with misaligned performance measures (which are common in developing state scenarios) and the imposition of external red tape as an instrument to make the imperfect measure align more closely with the bureaucrats’ effort and show that in such a case, high-powered incentives such as pay-for-performance compounds the multi-tasking problem.