PERFORMANCE MEASUREMENT FOR LOCAL AUTHORITIES IN PENINSULAR MALAYSIA[1]

 

KUPPUSAMY SINGARAVELLOO
SAMSINAR MD. SIDIN
MURALI SAMBASIVAN
ZALEHA MOHD NOOR

Graduate School of Management
Universiti Putra Malaysia
Serdang, Selangor. 

 

INTRODUCTION 

Malaysia is a parliamentary federation of eleven states in the peninsula, federal territories of Kuala Lumpur, Labuan and Putrajaya and the states of Sabah and Sarawak located in the northern part of Borneo Island. Malaysia is a multi-racial society of over 23 million in 2000 with the ethnic Bumiputeras (majority of whom are Malays) forming 61.2 per cent of the population followed next by the Chinese (24.5%), Indians (7.2%) and the rest are minorities.[2] Of this, the urban population is split exactly into equal part between the bumiputeras and the non-bumiputeras.

Not only in Malaysia, the public sector of most developing nations, let alone their local governments hardly have any performance measures of their services provided (Kloot, 1991, 1995). Kloot (1999) claims that the public perceive the performance of public servants and managers are hardly evaluated. He believes, for instance, the managerial accountability in the Australasia-Victorian public sector is absent as the notion of measurement of managerial performance in the public sector is perceived as unimportant. In Malaysia, there has been a pressure to improve the performance of the public sector over time, and the Manpower, Planning and the Modernising Unit (MAMPU) of the Prime Minister’s Department spearheaded the efforts in this respect. Subsequently, there have been a number of government circulars showing what is expected in improving the performance and the current premier has introduced the concept of Key Performance Indicators (KPIs) for the public sector issued by MAMPU’s Circular 2/2005. Else, there has been no serious effort in introducing an effective and efficient measuring method to appraise the performance of the public agencies and the local government. An ongoing study on the effectiveness of the local government in Malaysia found that local government officers and councillors indicated that they are largely responsible and accountable to the State and Federal agencies but the people they serve. On the other hand, the Public Complaints Bureau under the Prime Minister’s Department identified that about 17% of total complaints received are attributed to local governments throughout the country. 

The recipients of the services are at best the right stakeholders who could evaluate the performance of their local government. State and local governments are the closest to the people (Olsen & Epstein, 1997) and as such it is highly necessary that public servants in these entities are held accountable to the people they serve.

This paper is part of a doctoral thesis that examines the method that could be used to measure the performance of the local government in Malaysia taking note the circumstances that surround the provision of the services. It intends to rank the local authorities according to their performance. Besides this, the doctoral thesis also attempts to identify factors that influence the customers’ perceived performance of their local government but this aspect is not covered by this paper.  

BACKGROUND OF LOCAL GOVERNMENT IN MALAYSIA 

Local government is the lowest of the three levels in the governmental hierarchy of Malaysia. It is a state creation as prescribed in the Lists Four and Five of the Ninth Schedule of the Federal Constitution. The Constitution also provides that the organisation of the local government and most of the municipal services be the responsibility of the state government. The Federal Government is sovereign-national; the state government is quasi-sovereign and the local government infra-sovereign. The Constitution does, however, provide for certain degree of influence on the local government by the Federal Government through the National Council for Local Government, chaired by the Deputy Prime Minister. The role of respective tiers of government is as shown in Table 1. 

TABLE 1: Selected Jurisdictions of State and Federal Governments, Malaysia

Source: Adapted from the Ninth Schedule of the Constitution of Malaysia.

Working on the principle of ultra-vires, local government in Malaysia are primarily governed by three sets of Acts, i.e. the Local Government Act 1976 (Act 171), Town Planning Act 1976 (Act 172) and the Streets, Drainage and Buildings Act 1974 (Act 133). The range of functions stipulated by Act 171 covers: (i) environmental, (ii) public health and cleansing, (iii) enforcement and licensing, (iv) public amenities, and (v) social services and developmental functions.

Today, local authorities in Malaysia are not the sole authorities for the provision of local services in their areas but operate alongside with other agencies of the Federal and State Governments.[3] Each local authority has an advisory board comprising of eight to 24 councillors appointed by the state government.[4] The appointment of councillors is usually governed by partisan representation from among the residents under the local authority. Section 10 of Act 171 stipulates that their selection should represent professions or the ethnic populace under the local authority. There are 96 local authorities in the peninsula and a total of 48 more in the east Malaysian states of Sabah and Sarawak.

Major functions of local authorities that still remain with the local authorities are: town planning, street lighting, building control, licensing, trades controls, maintenance of local roads, and car parks. In addition, local authorities are also the agencies in charge of the facelift for the township and beautification programs. As such there is consistency in the services provided and these can be categorized as mandatory services. Other minor services such as provision of bus services, water maintenance and supplies, river management, fire services, solid waste disposal and sewerage services have shifted to other relevant departments or agencies. This is partly due to the privatisation policy of the federal government coupled by privatisation of services at the local government level which has brought about the change in patterns in the public sector though with some limits. The functions or services that have undergone the structural change are as shown in Table 2. While this went against the concept that “local provision is efficient where benefits are local, as with streetlights, and central or national provision is efficient where the benefits are nationwide, such as national defence” (Musgrave, 1997). 

TABLE 2: List of Services that have been moved from the Local Authorities

However, local authorities have to bear the burden of having to pay for some of the privatized services – especially the privatisation of solid waste disposal and related cleaning services. Under the interim period of the privatisation plan, the private consortium which undertook the provision of the solid waste disposal and urban cleaning services are paid by the local authorities. A number of the poorer district authorities have been faced with lack of funds to pay the consortium due to higher cost of private provision of the services. Nevertheless, these events have led local government in the country to be more focussed in the remaining services. 

PERFORMANCE MEASUREMENT OF LOCAL GOVERNMENT IN MALAYSIA 

Background to the Study 

The Theory of Social Goods forms the core of public sector economics. Musgrave & Musgrave (1989) iterate that the market does not provide similar services that would rival those by the public sector. The theory also stipulates that uniform services are provided to benefit people of all walks of life, unlike that by the private sector which tailors services to the specific class of the society. On the other hand, the Public Choice Theory argues that bureaucrats are rational, self-interested utility optimisers and their actions can best be understood in terms of budget maximization (Niskanen, 1973; Bolton & Leach, 2002). Here it explains that managers who succeed in maximizing their budgets exercise greater power over other managers within the same public organisation.

Economists generally accept the view that only the central government should perform income distribution, even though local governments may perform some allocative functions (Musgrave, 1971). Rothenberg (1970) and Ellickson (1971) claim that a central jurisdiction would most likely be more extensive in redistribution than a fragmented one.  

As public administration involves public managers and the need to administer public money, there is a great deal of interest in the field of accountability that is vested in the public servants. Crook and Sverrisson (2002) identified accountability as the key to increasing the responsiveness of local government to the poor, and to make development more pro-poor. Good local government also requires mechanisms for accountability to local citizens and this requires the access to information and resources available and used by the local authority and without public participation, public servants would most likely feel not indebted to show good results in their work (Devas & Grant, 2003).

Hiskey & Seligson (2003) through their study on decentralization and local government performance in Bolivia stressed that the importance of local authorities is resembled by the concept that local administration at best should be administered by the people and by agencies nearest to the people, instead of being centralised. In the United Kingdom, the central government decides on the extent of the services (nature, scope, quality and direction of the principal local services) of the local authorities.

Smaller local authorities cannot provide the same services, in terms of quantity and quality, as provided by larger local governments, simply because of variations in resource mobilisation. The variation in resources available between local authorities may explain great local differences in the services that are provided, and hence substantial differences in the standard of living between the small and the larger places (Jackson, 1967). In tandem, the performance of local governments will also be related to the resources available to the administrators.

It is evident, as such, that public services also look at social goals of the citizenry to whom these services go to. Profit is not an important issue (Audit Commission, 1986) but efficiency of resource allocation and administration is. Along the way, public administrators have become complacent, especially when the performance of the personnel is left unchecked by the higher authorities. With respect to local governments, being somewhat quasi-government, the performance of the institution and its personnel are often unchecked due to its supremacy in its own sphere. Democracy, which expects elections to decide on the leadership and determining candidates as people’s representatives, happens to be one of the most powerful tools in addressing this issue.

In Malaysia, although elections are held to elect people’s representatives at the federal and state level, none is available at the third level where the office bearers are appointed by the state government, which is the statutory owner. The citizenry are also ill-equipped with what can be expected from their local governments although their awareness on this respect has been rising over time. For instance, the man on the street is often confused about the functions of local government in Malaysia although its importance to him is very real and personal (Jones, 1997). As such it is not surprising to note that most local governments are also uninterested to disseminate information to their residents on how their revenue is spent fearing that they will be burdened with too many unwanted queries and objections. This view is on the contrary to the statement by Plastrik (2000) who proposes that the performance of different local government organisations must be publicized in the form of scorecards in the news media. Lack of the check-and-balance system by the people has led most local authorities in the country complacent and self-governing.

The Need for Performance Measurement of Local Government 

Without the electoral system at the local level, local authorities have had no compulsion to provide the best services for their people. In the past, the specific needs of the taxpayers and the service recipients have not been given due attention as the policy makers preferred a top-down approach. Most decisions are made in view of the expected needs of the residents. However, there have been little accountability by the local authorities to the people they serve. As such, a number of issues have shown to be on the contrary to the needs of the people.

This research will certainly be of great significance to benchmark local authorities especially in Peninsular Malaysia. Setting the performance indicator would identify the level of performance for each local authority evaluated from various parameters or indicators. Identifying the level of performance would enable the Federal and State governments as well as the public assess the level of provision of services by their local authorities. The method employed in this study also gives prominence to customer’s evaluation. Using this, it is expected that local authorities would be more accountable to the people, at least through improvement in the services over time. Although the study was carried out at one point of time, it can be repeated at later periods to re-examine the performance of each local authority.

The setting of such indicator would also enable local authorities to attempt to out-perform each other. Improvement in performance would only prove to be beneficial to the residents under the jurisdiction of the local authority.

Indicators, once identified, are expected to pave a way for local authorities to identify efficient ways to improve their performance by focusing on related variables. Ultimately, services provided must match the needs of the people and the satisfaction of customers is given due attention.

  

Determining the Composite Performance Index

(CPI) of the Local Authority

 

Parasuraman et al. (1988) points out that the growing importance of customer service has been well accepted and acknowledged. Though SERVQUAL has been widely employed in assessing customer satisfaction and establishing the gap between customer expectation and delivery, this study did not employ SERVQUAL as the questionnaire instrumentation was to be carried out on customers as they leave the counters, and as such time will be crucial to ensure the respondents commit to sincere answers. Graham (1994) iterates that organisations should emphasize on customer service to continue market expansion, foster customer loyalty and to have a competitive edge against other competitors. However, in the public service setting, where profitability is barely the motive, and customers are required to seek government agencies for monopolised services, satisfaction of customers were hardly given due attention in the past.

Two baskets of scores based on a number of variables are established. The first basket covers the establishment of Output Performance Indicators of Local Authority (the Best Value of United Kingdom forms the basis). It covers indicators formulated from revenue, expenditures, proportion of revenue earned from local resources (excludes grants received), rate of tax collected, proportion of revenue used for administrative and development purposes, expenditure to collect taxes, number of licenses issued, number of payment centres, number of compounds, and the like. Most of these parameters portray the extent of effort by the local authorities to improve their services and imposition of penalties for non-compliance to stipulated laws and regulations.

The second basket of variables comes from two sources of data captured from customers. These are from the customers who were just leaving after receiving counter services and secondly from residents under the jurisdiction of the local authority. Data from both groups are obtained by means of a tailor-made questionnaire for each group. These primarily measure satisfaction of services provided by the local authority. 

Construction of CPI for Local Authority 

Each of the local authority indicators are converted into an index while the average total scores from each of the customer satisfaction surveys forms two other indices. Once decided on the technique to be employed, the score for each local authority for each source of data can be determined using:

 

 

                        I₁          =  i₁ + i₂ + i₃ + i₄ + i₅ + ….. i_n-1 + i_n

 

           

where n = number of indicators used and i = index for individual indicator.

All three sets of indices are combined with an assigned set of weights to form the composite performance index (CPI). So the total score for the local authority becomes:

 

                        

 

where w_1,  w_2,  w₃ are weights used on the scores of local authority indicators, residential satisfaction and counter service satisfaction surveys and I_1,  I_2, and I₃  are indices from the respective data sets. Here, CPI acts as either an index or a sum of scores obtained through the weighted measure.

 The highest score/index would mean that the performance of the related local authority is deemed superior to others with lower scores. Cutler and Waine (1997) claim that incorporating expert judgments could overcome the problems that arise from arbitrary assignment of weights. Instead of assigning weights arbitrarily for the purpose of this paper, an interview session with experts in the field was employed at a later stage of the study to validate the final weights.

 

METHODOLOGY 

The study employs largely an empirical approach in meeting the objectives of the study. As it has been mentioned before, the first part deals with establishing a CPI for the performance of local authority employing the organisational output and satisfaction variables from the customers, i.e. from the counter services as well as those from the residents. The second part of the actual study which is outside the ambit of this paper, attempts to identify the relationship between perceived performance score (PPS) by customers and independent variables such as leadership style of the heads of departments, employee satisfaction, level of innovation and creativity in delivering services, as well as the type of local authority. The perceived satisfaction are a series of questions set under Section A of the questionnaire whereas the PPS employs a total score of 12 items in Section B with scores ranging from 1 (min) to 10 (max). Items in Section A refer to respective speciality, i.e. the counter satisfaction survey focus much on the services, reception, evaluation of staff manning the counter and environment of the counter services while that for the household customer survey focussed on an overall perspective covering a wide range of items covering neighbourhood, recycling efforts, solid waste disposal, roads, drains, streets, greens and other general urban attributes.

 

The scope of the study for this paper is depicted in Figure 2 below.

 Although both primary and secondary data are used in this study, primary data forms the bulk of the data required. Five different set of questionnaires were formulated to obtain information required for the research. These are employee satisfaction, leadership style, local authority indicator survey, counter service satisfaction and residential customer satisfaction surveys. Most of the secondary data are sourced through the local authority indicator survey from the respective local authority’s documented reports.

The surveys were carried out from October 2004 until the first week of August 2005. All four surveys, except indicator surveys, were completed by March 2005 while repeat visits had to be carried out to ensure indicator surveys are completed and returned by August 2005. The study is extended to two-thirds of all local authorities in four states (representing regions in the peninsula). The local authorities selected were to represent the type of local authorities as well as their financial standing. Once identified, all five survey instruments were administered in the local authority area. Three questionnaires were administered within the local authority premises once permission was granted by the local authorities concerned and it was supported by a copy of letter from the Federal and the respective State Governments. The leadership style survey targeted the local authority executive officer and all the heads of departments while the employee respondents were randomly chosen among all employees who were frontline staff and those who deal directly with customers. The sample size of the employee satisfaction is equivalent to the number of customer samples in the local authority area. Two other surveys covering customers in equal size are obtained on a random basis from customers who have been just served at the counters and another independent sample of residents based on cluster sampling. The sample size is obtained as a proportion of the total population under the local authority’s jurisdiction.

In sum, 34 local authorities (one-third of the population in the peninsula) were surveyed to produce 34 indicator surveys, 253 leadership, 1328 employee satisfaction, 1437 customer counter service satisfaction and 1420 residence customer satisfaction survey respondents. The employee satisfaction sample is slightly lower than each of the customer sample as some local authorities had workforce smaller than the targeted sample size. In these local authorities, attempts were made to cover all the employees as it was noticed that almost all of the employees had some interaction with customers, unlike that in the larger local authorities.

 

ANALYSIS AND FINDINGS 

As mentioned earlier, this paper focuses on identifying a method that could establish a CPI for local authorities in Malaysia using a pool of acceptable indicators. We will thus tailor our discussion and analyses accordingly.

 

Establishing a Composite Performance Index (CPI) for Local Authorities 

Although there are a number of other variables that could be included, indicators shown in Table 3 are used for the purpose of this paper in computing a CPI. Analysis uses data for the year 2003 although data for 2002 was also available.

Indicators used measure the extent of effort of the local authority in providing satisfactory services although it may have to perform under severe financial and human resource constraints. With financial weaknesses, the Public Services Department (PSD) does not approve new positions in the local authority.[5] Instead of hoping for financial grants to be provided by the State and Federal governments, many local authorities have be urged to improve their efficiency of collecting taxes from existing holdings (property taxes) under them and explore new sources as well as expanding outside traditional services to earn user-pay revenue (usually called the non-tax revenue). The degree of success in deriving direct and non-tax revenues is dependent on the initiatives and efficiency of the local authority and it impinges on the leadership of the local authority.

Table 3 shows the indicators that are used in this paper, taking cognisance of the issues raised above, yet at the same time all local authorities irrespective of type of local authority are put on the same platform to compete on the indicators.

Total scores for each indicator can be simply summed up after some form of normalisation is performed by means of turning them into an index: 

Index    =         (Observation for local authority – Lowest observation among all local authorities) / range (i.e. difference between the maximum and minimum) observations among all local authorities.

Again, all attributes of local authorities are made equal when put in the same basket without looking at type of local authority, size, revenue size and others. These attributes will be looked into, at least by grouping them into type of local authorities.

Each parameter is calculated using real values which is then ‘normalised’ to form indices ranging from 0 and 1. Thus, with 14 parameters employed to construct part of the CPI, the range for CPI is thus between 0 and 14. All 14 parameters assume equal weights for the computation of CPI.

 

TABLE 3: Indicators Used in Establishing the CPI 

 Four parameters have been found to be insignificant to the construction of local authority performance parameters (Table 4). These were deemed to be less important for the said purpose and their use were not concrete to be defended.