Managing Performance in the Public Sector

Hans de Bruijn

• Publisher: Routledge
• Year: 2007
• Print ISBN: 9780415403191
• eBook ISBN: 9781134141852
• Topic: Business
• Subtopic: Business General
• Index: Business

Topical and taking a bold stance in the contentious debate surrounding performance in the public sector, this new edition shows readers how performance thinking has a substantial impact on the management of public organizations.

Thoroughly revised and updated, this highly successful text, written by an experienced academic and practitioner is packed full with a wealth of new features. These include:

• more examples and cases, from a variety of different sectors, including, hospitals, courts, school and universities
• a whole new chapter on the dynamics of performance management; answering the questions – how do PM systems evolve? Which effects will dominate in the long run?
• many extra recommendations for making PM attractive for managers.

An informed and up-to-date analysis of this subject, this is an essential text for all those studying, both at undergraduate and postgraduate level, performance management in the public sector.

Part I

Chapter 1

An introduction to performance measurement

The beneficial effect of performance measurement

1 Introduction and outline of the argument in this book

In recent years, management techniques from the private sector have penetrated deep into professional public sector organizations such as hospitals, universities, courts and schools. One of these techniques is performance management. The idea is that these professional organizations, like companies, provide products and services and that their performance – their output – can be measured. A court can be assessed by the number of judgements it passes, a police force by the number of fixed penalty notices it issues and scientists by the number of publications in scientific journals. A professional organization that manages to define its products can demonstrate its performance, which may improve its effectiveness, efficiency and legitimacy.¹

A fruitless debate: public profession versus accountability

It is remarkable that positions are easily taken in the debate about performance measurement in the public sector. On the one hand, there is the view that performance measurement does not do any justice to the nature of the activities performed by professional organizations. Professional organizations are organizations that provide public services. These public services are multiple-value ones (i.e. they have to take several values into account) and are rendered in co-production (in cooperation with third parties). A school must make its pupils perform well, but must also have a good educational climate (multiple value); its pupils’ performance depends on the school’s effort, but also on the extent to which pupils are stimulated at home (co-production). A court must pass judgement as soon as possible, but its judgement must be well-considered (multiple value); a court can hardly influence the number of cases it has to deal with and the behaviour of the litigating parties (cooperation). Performance measurement reduces this complexity to one single dimension.

A manager who imposes output targets on a professional organization and is later pleased to find that they have been achieved is fooling himself. The example of the Soviet Union’s centrally planned economy is often cited. Order a factory to make as many nails as possible from a given quantity of steel, and it will indeed produce many, lightweight, nails. Order the same factory to produce a certain weight in nails, given a certain quantity of steel, and the nails will be made as heavy as possible. In such a system, the professional question of whether the nails produced are functional is never asked. Something similar applies to professional organizations. In many cases it may not be difficult to achieve a certain output, so long as an organization is prepared to ignore professional considerations. Achieving output targets does not tell us anything about the professionalism and/or quality of the performance; an effort to reach output targets may even harm professionalism and quality.

The opposite view begins with the idea of accountability. The more complex the services that professional organizations must provide, the more necessary it is to grant these organizations autonomy in producing such services. While they are autonomous, they are also accountable, however: How do they spend public funds? Does society receive ‘value for money’? After all, granting autonomy to a professional organization may cause it to develop an internal orientation, to be insufficiently clientoriented, to develop excessive bureaucracy and therefore to underperform. Autonomy without accountability conceals both good and bad performance. Moreover, if organizations are accountable, they can learn from each other. The poorly performing organizations might notice what the well-performing professional organizations are and might subsequently introduce their best practices.

Accountability is a form of communication and requires the information that professional organizations have available to be reduced and aggregated. Performance measurement is a very powerful communication tool: it reduces the complex performance of a professional organization to its essence. It therefore makes it possible to detect poor performance, allowing an organization to be corrected if it performs poorly. If a professional organization performs well, performance measurement might play an important role in making this transparent and in acquiring legitimacy.

Both lines of reasoning are rooted in the same development: the need to grant autonomy to professionals performing complex public tasks. On the one hand, this development implies that professionals account for their performance: autonomy and accountability go hand in hand. On the other hand, it implies that it is becoming increasingly difficult to define performance, since autonomy is necessary because the performance is so complex.

This shows that the antithesis set out above is fruitless: both lines of reasoning are correct. Therefore, an important question in this book is whether it is possible to develop a more balanced perspective on performance measurement. Is it possible to design performance measurement in such a way that it takes into account both the complexity of the profession and the need for accountability?

An outline of the argument in this book

I intend to develop this more balanced perspective by means of an argument that will proceed as follows:

• First, I indicate that performance measurement can have a beneficial effect on professional organizations. It may improve the professionalism of the service rendered, the professional organization’s innovative power and the quality of (political) decision-making. Negative judgements about performance measurement tend to be passed too soon; performance measurement is a much more differentiated activity than is often suggested (this chapter).
• In addition, strong criticism may be levelled against performance measurement. Performance measurement has a great many perverse effects: it may bureaucratize an organization, killing all incentives for professionalism and innovation and causing performance measurement to lead mainly to strategic behaviour. Performance measurement may considerably widen the gap between political decision-making and implementation (Chapter 2).
• Then there is the question about the dynamics of performance measurement systems. How do they develop in the course of time? I summarize this dynamism in five laws, the most important of which is the Law of Decreasing Effectiveness (Chapter 3).
• This gives rise to an ambiguous picture: apart from the beneficial effects of performance measurement, there are perverse effects. This raises the question as to how performance measurement can be designed so as to minimize the perverse effects. For this purpose, in Chapter 4 I introduce three criteria that performance measurement should meet if it is to fulfil its function properly: interaction, variety and dynamics. These criteria may be used to design a system of performance measurement. This is why I refer to them as ‘design principles’. I work out these design principles in Chapters 5 to 7.
• Chapter 5 focuses on the question of how performance measurement can be trustful. This means that both management and professionals have confidence in a system of performance measurement. The answer is that a system of performance measurement should be developed in interaction between management and professionals. Applying performance measurement also requires such cooperation.
• Chapter 6 deals with creating rich pictures of a professional performance. For management as well as for professionals, performance measurement should take the multiplicity of professional activities into account and not degenerate into a single activity. This is why performance measurement should always tolerate variety (in product definitions, for example, or performance indicators, interpretations of output targets).
• Closely associated with this is the idea of lively performance measurement. Performance measurement must be an activity that gives rise to management and professionals feeling challenged. I explain in Chapter 7 that this liveliness can only be created if performance measurement focuses not only on professionals’ products, but also on the process of generating them. Performance measurement should not confine itself to paying attention to numbers of judgements, official police reports or scientific articles. It should also pay attention to administering justice, fighting crime and conducting research. These illustrations imply that, apart from a product approach, there is a need for a process approach. Liveliness also requires a system of performance measurement to be dynamic: it should adapt itself to changing conditions.
• Finally, in Chapter 8, I summarize the findings of this book about the significance which performance measurement may have in professional organizations.

Focus and terminology

Performance measurement is used in many organizations. In this book, I deal mainly with public professional organizations, examples of which may be conventional professional organizations such as hospitals, universities and the court service, but also many ‘street-level’ organizations such as the police, the probation service and a large number of departmental implementing bodies.

For the sake of readability, I consistently use the terms ‘management’, ‘manager’ and ‘professional/professionals’ in this book. The professional is the person who designs the primary process; the manager is the person who, by performance measurement among other methods, tries to steer this process and is responsible for it in most cases. It should be remembered here that the same player can fill both roles because many professional organizations are multi-layer organizations. Take, for example, a court. The Minister of Justice is a managerial player and may regard the Council for the Judiciary – many European countries have such a Council – as a representative of the profession. This may be different from the perspective of a court: the court represents the profession; the Council represents the managerial system. An individual judge may take yet another view: he or she is the professional; the court management is the managerial player. Something similar is true of the layered structure of national systems of universities: the Ministry of Education, the Executive Board of a university, the Dean of a faculty, the faculty’s research groups and individual researchers; or of the layers formed by the Ministry of Health, the Executive Board of a hospital, the management of a division and individual surgeons.

Who is the manager and who is the professional may therefore differ from echelon to echelon. This conclusion is relevant to the question of how the performance measurement systems between these layers relate to each other (Chapter 6).

In this chapter, I first give a brief description of performance measurement (Section 2). I then go on to discuss the positive effects of performance measurement (Sections 3–6). Next, I deal with a number of objections to performance measurement (Section 7).

2 Performance measurement: what it is and its functions

In this section, I set out – very briefly – how performance measurement is defined in the literature and what functions it may have. For more detailed considerations of these introductory questions, I refer the reader to the literature.²

The central idea behind performance measurement is a simple one: a professional organization formulates its envisaged performance and indicates how this performance may be measured by defining performance indicators. Once the organization has performed its tasks, it may be shown whether the envisaged performance was achieved and how much it cost.

The problem here is, of course, that the effects of an organization are often difficult to measure. This is because public performance has to take multiple values into account and is achieved in co-production. Furthermore, the period between an intervention and its final, envisaged effect may be lengthy. This makes it impossible in many cases to measure the final effect of a professional (the ‘outcome’), not least when abstract goals such as liveability, safety, integration or quality are involved. What is measurable is the direct effects of interventions by an organization (the ‘output’: the licence issued, the fixed penalty notice, the article published), while, in some cases – somewhere between direct effects and final effects – intermediate effects may be identified which are also measurable. It should be pointed out that the terminology in the literature is not always unambiguous. Some writers give the concept ‘output’ a very narrow definition (only the direct effects), while others use a very broad definition (including the outcome).³ In this book, I confine the meaning of performance measurement to the effects that are measurable. This choice seems legitimate to me because it matches much of the everyday language used in organizations: many organizations that use performance measurement count the products they generate.⁴ Concepts such as ‘output’ or ‘product measurement’ may be regarded as synonymous with performance measurement.

Once a professional organization has defined its products, it can plan the volume of its output over a certain period and establish at the end of this period what output was achieved. As a result, a professional organization – like many organizations in the private sector – may pass through a planning cycle, in which performance is planned, achieved and measured. This is often accompanied by a strong orientation on goals. Performance measurement forces an organization to formulate targets for the various programmes for which it is responsible and to state the period within which they must be achieved. It will then show its ambitions for each of these targets in performance indicators.

Performance measurement can then fulfil a number of functions.⁵ Those mentioned most frequently are the following:

• Creating transparency. Performance measurement leads to transparency and can thus play a role in accountability processes. An organization can make clear what products it provides and – by means of an input–output analysis – what costs are involved.
• Learning. An organization takes a step further when it uses performance measurement to learn. Thanks to the transparency created, an organization can learn what it does well and where improvements are possible.
• Appraising. A performance-based appraisal may now be given (by the management of the organization, by third parties) about an organization’s performance.
• Sanctioning. Finally, appraisal may be followed by a positive sanction when performance is good, or by a negative sanction when performance is insufficient. The sanction may be a financial one, but other types of sanction are possible.

These functions have an ascending degree of compulsion: the impact of transparency will be limited, the impact of a sanction can be very high. Each of these functions can apply to an organization, but also facilitate comparison – a ‘benchmark’ – between organizations.

The beneficial effect of performance measurement

In the literature, a great deal of research is available about performance measurement. A first impression is that performance measurement has a beneficial effect.

3 Performance measurement leads to transparency and is therefore an incentive for innovation

First, performance measurement leads to transparency. This transparency has both an internal and an external function.

The internal function

A professional public sector organization has limited external incentives for effectiveness and efficiency, and therefore has an almost natural tendency to ...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Illustrations
• Part I
• Part II
• Part III