|
|
PERFORMANCE MEASUREMENT IN LOCAL GOVERNMENT AUTHORITIES: BETWEEN THEORY AND PRACTICE
SITI
NABIHA ABDUL KHALID
INTRODUCTION The techniques and underlying philosophy of New Public Management (NPM) have been accepted and implemented in both develop and developing countries. With the belief in the superiority of the private sector practices (Mascarenhas, 1996), it is not surprising that the fundamental concept of NPM is the conviction that public sector organizations should utilized the practices of private sector organizations. One of those practices is the use of performance measurement system to improve the effectiveness and efficiency of public agencies. As a result, various states and governments at all levels have spent time and money on performance measurement and evaluation of their agencies (OECD, 1996; Shah, 2003). Consequently, laws and directive were issued to implement these result -based policies such as the Government Performance and Results Act, 1993 in US and the Financial Management Initiative in UK during 1980’s and the concurrent legislations which requires all public agencies to monitor performance against the set plans and objectives. The same is also true in Malaysia which have implemented NPM since 1980’s with the introduction of privatization policy and quality work culture movement which the emphasis on total quality management, benchmarking of services and performance based budgeting. The emphasis on measuring performance is further enhanced with the latest initiative to introduce a “new performance based culture” for all public sector agencies in early 2005 (DAC 2/2005). This new directive requires public agencies to formulate, evaluate and report their key performance indicators and their associated benchmarks. The system of key performance indicators have been established for government linked-companies (GLC) a year earlier. The use of KPIs (key performance indicators) is the latest of the initiatives aimed to improve the public sector to be more customer-focused, results oriented, responsive, accountable and innovative which took off with the Quality work culture movement in 1989 and in tandem with the worldwide movement in reforming the public sector both within the developed and developing countries. Concurrent the above, the public are demanding more accountability in the delivery of the public services, especially from local government authorities. Citizens are more aware of their rights and are pressuring for a greater accountability from local agencies. Consequently, performance of local government authorities has attracted considerable interest both within the academic circles and also by the general public. Hence, the purpose of this paper is to discuss performance measurement system within the context of the local government agencies. As such the conceptualisation of performance measures, the theory and practice of performance measures are discussed in this paper. The paper will examine the lessons learned from the implementation of measures in the public sector, specifically local government in both develop and developing countries.
CONCEPTUALISING PERFORMANCE MANAGEMENT SYSTEM IN THE PUBLIC SECTOR Performance measurement system, according to Otley (1999; 2003) would require the following activities:
However, the issues of performance measures for government agencies in general and specifically, local authorities are very problematic. To implant private sector practices such as measurement system in the public sector especially for local government agencies would be very challenging. If we examined the conceptualisation of PMS as proposed by Otley, we see that the first step the organisation needs to do is to determine the key objectives of the organisation. For commercial organisations, even though explicitly, interests of various stakeholders are deemed to be vital, the ultimate objective is profitability, or in whatever economic terms it is couched. The interest of the shareholders is paramount. As noted by Curristine (2005) measuring performance in the public sector is problematic as noted by “What is meant by performance in the public service context, and how can it best be measured? Should a service be judged by, say, its accessibility or its financial cost, and who should do the judging? How can moves to increase the managerial responsibilities and decision-making powers of public servants be reconciled with democratic control and effective auditing procedures?” (p. 2) Some authors have maintained that the criterion in evaluating performance for public agencies are “Whether the public manager is doing the right things – that is, delivering services consistent with citizen preferences; and (b) whether they are doing it right – providing services of a given quality in the least cost manner (Shah, 2003, pg 18-19). To determine whether public agencies are doing the right thing, the following questions need to be answered:
(Shah, 2003, pg.19) As for local government authorise, there is the suggestion that a good local government should incorporate these basic criteria: (Andrews & Shah, 2003, pg. 3.22)
Thus, since a “good” local government should fulfil the above criteria, it is reasonable to expect it should have measures on each the basic criteria. Given the above, what measures of performance should be used within the public agencies, specifically the local government authorities. Then, the question arises on what measures to use and how do we formulate measures for performance? Should the focus be on input indicators (the amount of resources used) the output indicators (units of output/service provided), outcome indicators (the results of service provided), the cost effectiveness indicators or the productivity indicators (focus on both effectiveness and efficiency). Various suggestions have been given on the characteristics of the performance measures to be used in an organisation. The measures, among others, should be congruent with organisational objectives, controllable, timely, accurate, understandable, actionable, measurable and assignable. Therefore, the indicators used should cover areas within the manager’s control; easy to measure and can be easily understood throughout the organisation. It should also be assignable to a specific person or team or department which will be responsible for the achievement of the targets. Measures also need to be valid, reliable, understandable, timely, resistance to perverse behaviour, comprehensive, non-redundant, sensitive to data collection and focused on controllable facets of performance (Ammons, 1995 as quoted in the Guide for Measurement of Local Government). PERFORMANCE MEASUREMENT OF THE PUBLIC SECTOR As mentioned in the previous section, many governments have implemented performance measures for their public agencies. In US, one of the criteria used by GOA in 1980 to measure organisational performance encompassing areas such as
The US government has also passes the Government Performance and Results Act (1993) which requires every federal government and agencies to develop five year strategic plans that are linked to measurable outcomes. The government agencies need to identify objectives and quantifiable and measurable goals for its programs and activities. Beginning from 2000 onwards, US federal agencies are required to provide annual program performance reports. The report should provide information regarding the indicators, goals and actual performance for past three years, a review of both successful and unsuccessful performance, and the action required and changes for goals for forthcoming year (Azevedo, 1999). In Malaysia, the use of indicators to measure performance of government agencies evolved from the issuance of Developmental Administrative Circulars (No 2/2005) in April 2005 in which the guidelines for implementing Key Performance Indicators was set. As the purpose of the circular is to evaluate the quality of service delivery, the emphasis for measuring performance is on front-line agencies that provides counter service to the public and the industrial and business communities. The performance measurement of an agency’s is based on the process of providing and delivering services. Thus, output and activity measures are the main types of indicators used to evaluate performance. The types of measure used will depend on the services provided and the core activities of the public agencies.
Prior to the issuance of circulars, the Malaysian Administrative and Modernization Planning Unit (MAMPU) had done a pilot project of KPIs implementation in six government agencies, one of which is a municipal council. The municipal council has identified its’ six core processes/activities which comprised developmental control, infrastructure and public amenities, commerce control, property tax evaluation, cleanliness and urban services; and enforcement. Thirty services have been identified for the six core processes. KPIs are then identified for these services. The targeted output for the each service is determined based on the actual delivery time as compared to the monthly productive period. As an example, the target (in minutes) set for approval of plans is based on the time allocated for that particular activity. For plan approval, approximately 260 minutes are required in order to evaluate and approve the plan. The number of plan approved per month is based on the productive time divided by the number of minutes to approve the plan. The council also has collected the data for evaluation reports. However, these reports are used internally such as during management meeting to evaluate and improve in service delivery and also to re-evaluate the targets for their KPIs. Similarly, various local government authorities in US have introduced annual outcome reporting and have produced performance data and information. As an example, the city of Portland has been producing report entitled: Service Efforts and Accomplishment: Annual Report on City Government and Performance” (Azevedo, 1999). For the performance based measures, the city of Sunnyvale in California defined goals, performance indicators and community indicators for each of its policy areas. The city also implemented performance based reward for its managers. If a programme achieved their stated objectives with respect to quality and productivity, the managers would be given bonus up to 10%. For local government in UK, performance indicator system is used for more control of municipal activities and restricting their latitudes (Kuhlman, 2003). As opposed to the centralised directive in other countries such as UK, US and Malaysia, performance measurement in Germany developed through the initiatives of the municipalities themselves. However, there were moves by the government, by directives and regulations, to impose output oriented accounting systems for local authorities through (Kuhlman, 2005).
THE UNINTENDED CONSEQUENCES OF MEASUREMENT Numerous empirical evidences have shown the limitations of performance measurement system (see for example Leeuw and Van Gill (1999) for a review of Dutch studies). The US Government and Results Act went through several transformations since the expected improvement arising from the system has not been achieved (Halachmi, 2005). For example, the General Accounting Board 2002 survey of performance measures of nearly 500 state and local government agencies in United States found that the measures were somewhat effective in increasing awareness of results. However, only a third of the agencies reported that performance measures had improved the effectiveness of their program (Plant and Douglas, 2006). Performance management of the Financial Management Initiative in UK was found not to be successful in influencing the allocation of resources and increasing accountability (Propper and Wilson 2003). Kuhlman (2003) research on performance measure and benchmarking activities in local authorities in Germany found the use of performance measures is time-consuming. The officers of the local authorities need to update the reporting system. This has hindered them from doing their other relevant activities. Subsequently, the officers stop benchmarking their activities. Furthermore, local authorities felt that implementing the measurement system provides little tangible benefits. The problem faced in implementing and benchmarking the performance measures across local authorities arises because the indicators are measured differently by different authorities. Contradictory and unclear political goals and various diverse stakeholders’ interests involved also contributed to the problem. The increase pressures for public agencies to meet their performance targets have also generate unintended consequences, one of which is measures fixation. Thiel and Leeuw, (2002) provide such example from the result of a survey by USA today (2002) and the American federation of teachers of the impact of introduction of standards for students which have the objective of enhancing the students intellectual development. As the students’ results would subsequently determine the schools budgets, teachers salaries and the principal’s position. Consequently, teachers, contrary to the purpose of introducing the standards, teach what is expected to be tested. Research on the use of measures in the public sector in UK has also illustrated the same dysfunctional effects. Proper and Wilson (2003) provide various examples of this such as such as massaging the truancy rates in UK education, massaging the waiting list and treated health-cases in NHS. Research evidence also found that reporting of measures might not be accurate; performance can be better or worse than reported (Wiebrens & Essers, 1999). The performance can be overrepresented (Thiel and Leeuw, 2002), i.e. the performance is worse that reported. One example is the British NHS system which has a target of waiting time for an operation of not more than two years. The result showed a decrease in the waiting time. However, the researchers found the reduction in waiting time was achieved due to the postponement of the first consultation (see Otley, 2003 for other similar example of gaming of indicators). The performance can also be under-represented, i.e., it is better than reported as noted by Wiebrens and Essers (1999) in their example of one performance measure for the Dutch police, i.e., the percentage of crime solved. The measure shows that the percentage of crime solved was decreasing which may indicated the performance of the police force is worsening. However, the crimes committed have become more violent. As groups of criminals have been arrested committing crime together, there would be a reduction in the average number of crimes. Even though the indicator is well established and accepted, it is not a good indicator since it does not different between different degrees and patterns of crime (Wiebrens and Essers, 1999) In addition, reporting of those measures are time-consuming and expensive since it leads to an increase in monitoring costs of the organization and the state due to proliferation of auditors and regulators. Additionally, there is also the argument that performance measures in the public sector measured too many things albeit the wrong things (Atkinson et al, 1997). CONCLUSION Even though the majority of the empirical evidences shown that performance measurement is challenging, can lead to dysfunction impact and provide little benefits, measuring performance is very crucial for the public sector, especially for local government authorities. The local authorities have a greater need to ascertain whether the current operational objectives are helping to achieve their overall goals. Since local authorities are the level of government that is closest to the people, they faced increased pressures for more accountability and transparency. In addition, the local authorities are facing greater challenges, due to increase in urbanisation and education levels of the population, and also industrialisation of the country. Such factors have resulted in the higher demand for urban services. Citizens are more aware of their rights and are demanding a greater accountability and transparency from local agencies. Besides administrative pressures, such changes have also exerted pressure on the management of local government finance. Without adequate funding, the local authorities faced difficulty in fulfilling their role as a provider of services and the facilitator of socio-economic growth at the local level. In addition, the local government authorities have various types and levels of constituents with differing values, needs and expectations (Thor, 2003; Propper & Wilson, 2003). Their stakeholders’ ranges from the recipients of services to the providers of funds, issue oriented NGOs and other levels of government. As such, local authorities have several ends to achieve. There are even conflicting demands from the same group of constituents, for example, recipients of services demands higher service levels with cost reduction for the service delivery (Plant & Douglas, 2006). Since there conflicting values and priorities of these various levels of constituents, it inherent for the local agencies that satisfying one group may almost mean dissatisfying another (Plant & Douglas, 2006, Thor, 2002). Having multiple stakeholders with conflicting needs may result in the measure used to evaluate local authorities performance may also be in conflict (Proper & Wilson, 2003; Thiel & Leeuw, 2002). The measurement and evaluation of public agencies performance is further complicated due to the vagueness of public policy. Policy objectives may results in contradictory and completing goals (Thiel and Leeuw, 2002). As a result, it is very difficult to determine which objectives are most important and to whom it is important. The multiple and vague goals would result in difficulty in measuring performance related to those goals. Thus, the main question is what are the key objectives of local agencies for which performance can be evaluated? In develop countries, measurement of local government in developing countries mostly focused on two issues (Andrews and Shah, 2003). First, whether the local authorities have conform to the legal requirements and have undertaken the process and activities required by law or standards. The second issue involve measuring the fiscal health which includes the discipline in financial management. Additionally, there have been calls made for researchers to formulate a conceptual model of PMS that is holistic and takes into consideration the social, political and cultural context in which LG operates (Thiel & Leeuw, 2002). This is because the contemporary measurement models advocated both by academics and consultants, such as the balance scorecard, performance value scorecard and Performance Pyramid, were based on rationalistic viewpoint, which mainly ignored the power relationship and political bargaining process (Brignall and Modell, 2000). These models did not show how actual emphasis on various performance dimensions is linked to various stakeholders’ interests. To be able to derive benefits from the measurement system, a performance measurement model needs to take into consideration the unique characteristics of local government (Thiel & Leeuw, 2002). It is imperative to develop not only quantitative and qualitative measures but it should be implemented with a contextual analysis of the service systems. It requires multiple indicators, referring to different aspects of policy implementation (both tangible and non-tangible) and also reflecting the interests of the various stakeholders (Thiel & Leeuw, 2002; Brignall &Modell, 2000).
|
|
|
|
|
|
|
|
|
|