The Performance Paradox in the Public Sector

Abstract

NOwadayS, states spend more attention, time, and money on performance measure-ment and evaluation in the public sector than ever before (Organization for Economic Cooperation and Development [OECD], 1996; Pollitt & Bouckaert, 2000, p. 87; Power, 1997). Results-based management is the talk of the day at all levels of the pub-lic sector: local, regional, national, and even supra national. Schools and universities, local governments, other administrative agencies, developmental aid organizations (nongovernmental organizations and international nongovernmental organizations), and organizations such as the World Bank are all involved in producing data and infor-mation on performance results and, if possible, impact. Power (1994, 1997, 2000) even refers to the "audit explosion" or the "audit society." Believers in New Public Manage-ment (NPM) attribute a high priority to measuring output and outcomes and aim to base their new policies and management activities on this type of information-ideally meant to make policy implementation more efficient and effective. However, evalua-tion studies show that many attempts to introduce results-based management are still unsuccessful (see, for example, Leeuw & Van Gils, 1999, for a review of Dutch stud-ies). Nevertheless, the need for measuring output, outcomes, and evaluation activities remains an important element in statements by politicians and administrators focused on improving government's performance. Below, we will argue that this increase of output measurement in the public sector can lead to several unintended consequences that may not only invalidate conclusions on public sector performance but can also negatively influence that performance. We will show that a number of characteristics of the public sector can be counterproduc-tive to developing and using performance indicators, illustrated by different examples. Finally, we will conclude with some suggestions on how to deal with the problem of performance assessment in the public sector. We believe this question is important The increased attention to performance assessment in the public sector coincides with the rise of administrative reform (cf. Power, 2000). In the 1980s, economic decline and increased international competition triggered such reform in most western states. New Public Management was the catchword (Hood, 1994). The objective was twofold: to cut budgets and to improve the efficiency and effectiveness of government bureaucracy. To achieve the latter objective, market-type mechanisms such as privat-ization, competitive tendering, and vouchers were introduced in the public sector, and departmental units were hived off into quasi-autonomous nongovernmental organiza-tions (quangos). Examples can be found everywhere (for a review of 10 OECD coun-tries, see Pollitt & Bouckaert, 2000). The practitioner theory underlying these changes is that politicians should stick to their core business, that is, developing new policies to realize (political) goals. Osborne and Gaebler's (1992) adage was "steering not rowing." According to these NPM gurus, policy implementation should be left to the market or, ifthat is not possi-ble, to (semi)-autonomous organizations operating in a quasi-market environment (e.g., competition between schools or hospitals). This separation of policy and admin-istration is facilitated through contracts being drawn up between the government and the organization that implements the policy. The contracts articulate which task has to be carried out and what the executive agent will receive as a "reward." The agent's per-formance is expressed in terms of performance indicators, such as the number of goods or services rendered. Input management is thus replaced by a results-based orienta-tion. Similar changes took place within government bureaucracy as well, where self-management and contract management were introduced to (partly) replace hierarchi-cal steering. The aforementioned changes in the public sector led to the adoption of a large num-ber of private sector techniques to measure and improve performance, such as perfor-mance indicators. Not only do indicators enable politicians to measure and evaluate the performance of public and private policy-implementing organizations, they also increase the opportunities to account for performance-another important goal of administrative reform (Jenkins, Leeuw, & Van Thiel, in press). Obviously, all these changes were fed by a strong belief in the measurability of performance in the public sector. However, as we shall argue below, that belief may have been somewhat simplis-tic (cf. Fountain, 2001).