Does performance measurement improve public sector performance?

It is expected governments will deliver on their promises, both to fulfil their democratic responsibilities and provide satisfactory services to the public. Using formal performance measurement systems is one way of achieving this aim and holding governments to account.

A paper in the Australian Journal of Public Administration assesses whether performance measurement improves performance by reviewing performance measurement systems across three Australian jurisdictions.

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Debates about performance measures

Existing evidence for public sector performance information leading to better performance is scarce. Where there is evidence, it seems to indicate that performance reforms do not work well. A review of Aotearoa-New Zealand government performance indicators over a 10-year period showed that the indicators had almost nothing to say about the cost-effectiveness of policy programs. Other research found that performance management had effectively no influence in public institutions, possibly due to lack of goal clarity and managerial authority in the public sector.

There are two broad mechanisms by which performance measurement might enhance performance:

• its very existence could encourage better performance
• the provision of information enabling better decisions.

For example, the management by objectives model predicts that performance information will improve performance on the premise that what gets measured gets managed.

About the research

The research focused on answering the question:

• does performance information lead to better performance in government agencies?

This involved looking at whether:

• the reporting of performance as below target leads to subsequent improved performance
• reported performance affects budgets
•  incentives based on performance measures improve performance
• the existence of good-quality performance measures improves performance.

The research used a case study approach and examined the nine organisations from three jurisdictions in the areas of policy, service delivery and regulation.

Performance measures, targets, and results were extracted from budget papers and annual reports spanning seven years. These were tabulated and analysed. The quantitative analysis was supplemented with:

• qualitative data gained from interviews with officials,
• examinations of official guidance on performance measurement,
• scrutiny of Hansard records of parliamentary debates
• and proceedings of parliamentary review committees.

What the research found

The research found there is little-to-no impact of performance measurement on improved performance. The study then considered potential influences on the quality and use of performance measurement. The impact of these influences is difficult to disentangle, but can be simplified by using the concept of boundaries between sub-systems.

These sub-systems were divided into three categories:

1. Influences internal to the performance measurement sub-system

• Financial resources for performance measurement
• Staff allocated to the performance measurement function
• IT systems in support of the function
• Comprehensiveness and quality of internal procedures and guidelines on performance measurement
• Training on performance measurement.

2. Influences outside the performance measurement sub-system but within the organisation

• The nature of the agency including its technology, history and ethos
• Whether internal decision-making uses performance measures
• The nature of the performance measures themselves (e.g. whether the factors they are trying to measure are easily measurable)
• Senior management attention and support
• Perceptions about performance measurement held by staff other than those directly involved in performance measurement.

3. Influences outside the organisation

• Incentives for individuals to meet performance targets in the forms of funding or otherwise
• Incentives for the organisation to meet performance targets
• The level of scrutiny applied by organisations such as audit offices or departments of finance
• Political inputs – the degree of ministerial and parliamentary attention to performance measurement
• Press, public and academic interest in performance measurement

Systems theory would suggest that the higher-level influences - from outside the organisation are likely to have more impact than the internal influences. For example, although adequate resourcing is necessary, resources will be found if there are sufficient external incentives. It is the existence of external incentives that is the driving factor.

This proposition was tested as far as possible but not all these influences were readily observable from the case studies. There was no evidence for any significant influence with two exceptions:

• The nature of the organisation: larger, operationally focused organisations with a background in the use of quantitative assessment tended to have better performance measures and these were the only ones with some tendency to improve performance when the indicators showed a lack of achievement.
• The level of external review at the jurisdictional level. This was most robust for the ACT.

What this means

The paper concludes that the failure to find evidence that performance measurement improves performance supports the view that performance measurement does not lead to improvement. One implication for practitioners and managers is because a performance measurement system is in place, it is not necessarily going to be effective in improving performance.

The research also found most organisational forces are directed to avoidance of performance measurement. There is only one countervailing influence that is potentially effective:

• the impact of external review by organisations such as audit offices.

However, the internal use of performance information for improvement may be effective when organisations have a culture that supports quantitative thinking.

Want to read more?

Does performance measurement improve public sector performance? A case of Australian government agencies - Graham Smith, John Halligan & Monir Mir, Australian Journal of Public Administration, April 2021

The original article is available via individual subscription to the journal or institutional access through a library service such as a university library, state library or government library.

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