Public sector performance measurement

Performance measurement in the public sector is different from that of the private sector. They include issues such as:

Democratic decision-making

Democratic decision-making means that many more people are involved in the decision process and it is not the function of performance measurement to question policy. The role is more related to highlighting areas where expenditure has not been effective in achieving a policy aim.

Public accountability

The use of public funds obtained by compulsory levy places a greater responsibility on policy implementers to demonstrate the effective use of such funds. This differs from a private sector operation, which involves a much smaller group of stakeholders.

Policy making processes

Making decisions is a slower and more consultative process than in the private sector. It may take much longer to change the focus of an activity in an attempt to improve performance.

No clear measure of effectiveness

In the private sector, profit generation and levels of customer satisfaction are used as a proxy or measures of effectiveness. The public sector does not have such an all embracing and clearly accepted measure of success. This often leads to the development of much larger number of performance measures to judge performance in a number of different ways.

Lack of competition

In public service, there are sometimes limits to the extent to which performance can be proven, as there is limited competitive pressure for improvement. This situation is changing in some countries with the introduction of competitive tendering for some government services.

Difficulties in measuring effectiveness

The public sector deals with a great many social, human and economic issues, which can be very hard to measure. For example, how do you judge the effectiveness of expenditure of defence activities and equipment? Has the expenditure been effective if there have been no invasions! This is just as problematic as for things such as healthcare and education expenditure where it is almost impossible to determine the effectiveness of different options for service provision, as there are so many non-controllable costs.

Unlimited demands on finite resources

In any country, the potential demand for public services will outweigh the resources available to fund those demands. Therefore, even measuring performance may sound futile.

The limited lifetime of a government

Governments have limited time in power, depending on the election cycle. The political process means that the government, and therefore the policies may change on a regular basis so that an individual policy may not be in place for long enough for it to begin to have any real impact.

Practical implications

The differences in the nature of the public services create the following practical difficulties:

1. It is much harder to establish accurate measures of efficiency.

2. The results need to be more widely circulated and explained to different stakeholders with diverse interests than is the case in the private sector. For example, the results on agricultural policy touch all aspects of the economy and affects different stakeholders differently.

3. There may be disputes about the results as a product of the political process or other environmental factors like an improvement in the weather conditions.

Characteristics of a good measure of performance

A good performance measurement will satisfy the following criteria:

It is appropriate for the objective it is meant to assess

It should be designed to produce information that indicates progress made towards the objective in a meaningful way. It has to measure what it is supposed to be measured.

The chain of cause and effect should be clearly established to eliminate erroneous results

For example, a decline in the number of hospital visits may be caused by improvements in the public health infrastructure or a change in climate, rather than by increased efficiency in medical treatment and diagnosis.

The effort and expense involved in data collection should be justified

The costs of data collection and analysis should be far outweighed by the benefits of measurement. This is about economic efficiency.

It should be focused on an activity which can be controlled

There is no point in setting a standard that cannot be controlled. For example, the supply of electricity to a country may depend on the rains available, which a country cannot control.

It should be clearly defined and specified

There should be no scope for error or ambiguity in what it means by, let’s say, ‘improvement’ or ‘better’. There must be a benchmark.

It should relate to a specific time period

The time period chosen should be appropriate to the activity being carried out. For example, one cannot effectively measure the success of a new policy within a month because the indicators might be just temporary.

It should not create performance disincentives

A performance measure should not be too demanding because it may encourage people to cut corners or change their behaviour simply to meet that target. This is tantamount to cheating.

The continued validity of the measurements should be regularly assessed

It is often useful to use a variety of measurements. This is especially true in major activity areas, in order to eliminate the chance of error or misleading results caused by other factors.