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Shin KimSenior Research Fellow Korea Institute of Public Administration

24 June 2015

Importance of Performance Management And Measurement of Productivity

Workshop on Performance Management for Public-sector

22-26 June 2015, Colombo, Sri Lanka

Importance of Productivity

• Productivity performance is important for a country’s future economic prospects

• Factors of inputs (labor and capital) cannot increase indefinitely. Productivity gains enable an economy to produce more for the same amount of inputs, leading to economic growth in the long run

• Monitoring and improving national productivity capability (supply side of economy) are important aspects of public policy in many countries

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Measuring Productivity• Productivity is used as a ratio of an output volume measure to

an input volume measure.• The APO uses national accounts as the basis for productivity

estimates. APO mainly uses labor productivity and total factor productivity (TFP) as two main measures

• Labor productivity can be measured in a number of ways, depending on the definitions of output and labor input measures. APO uses the basic-price GDP per actual hour worked, which adjusts for different work patterns across countries and across time.

• The TFP is productivity accounted to innovation and knowledge

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Labor Productivity Level by Per Worker GDP, 2010

- GDP at constant basic prices per worker, using 2005 PPPs, reference year 2010

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Labor Productivity Trends of Japan over Century and Levels of Asian Countries

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Time Durations Taken to Improve Labor Productivity by Japan and the Asian Tigers

1. Growth of Korean Economy

1960 1980 2000 2010 $-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$155

$1,674

$11,347

$22,424

$222

$2,046

$5,954

$10,415

$1,334

$8,696

$22,755

$37,029

GDP Per Capita (current $US)

South Korea APO members OECD members

Source: Author's construction based on data from the World Bank database

Economic Growth in Korea: 1960-2010

1. Growth of Korean Economy

19601962

19641966

19681970

19721974

19761978

19801982

19841986

19881990

19921994

19961998

20002002

20042006

20082010

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

Real

GDP

per

capi

ta (2

000

US$)

Korea, Rep of.

Difference in output due to TFP growth or knowledge accumulation in Korea

Difference in output due to growth in labor and capital in Korea

Source: World Bank database

Productivity Growth in Korea:

1960-2010

Characteristics of the Public Sector

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• No distinctive measures of performance such as price, profit• Do not depend on market system : earning is not related to

sales• Difficult to secure responsibility based on performance • Because of these characteristics, the public sector has

difficulties in maintaining performance • Problem of X-inefficiency, government failure• 1980~90s : Economic difficulties

Backgrounds of Public Sector

New Paradigms of Public Administration

• Citizen-oriented Management Supplier oriented ⇔management

• Performance-oriented Management Input and ⇔Process oriented management

• Market-oriented Management Government ⇔oriented management

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Backgrounds of Public Sector

OutcomesOutcomesInputsInputs Process/Throughput

Process/Throughput OutputsOutputs

personnel budget

 activities produced work results

effects/impact goal achievement

(Example : policy on unemployment)

INPUT THROUGHPUT OUTPUT OUTCOME

budget personnel organization 

set up programs for work set up/provide training counseling for employment

number of trainees number of counseling  cases

number of   reemployment unemployment rate living conditions of unemployed

Productivity in Public Sector

Productivity Measures

1. What is Productivity Measures?

- index or indicators of measuring the magnitudes of productivity level- specified data can be collected, produced and applied for the measures

2. Types of Productivity Measures

- input measures - workload measures - output measures - outcome measures

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Productivity Measures

3. Types of Productivity Measures

efficiency measures = quantitative measures

effectiveness measures = qualitative measures

4. For Result-oriented productivity management

use outcome or at least output measures

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Activity or Workload Measures

Measures productivity in terms of activity or workload

How to approach to define activity or workload measures - describe what kinds of activity do you usually do - classify the activities specified - specify measures to reflect the magnitudes and quality of classified activities

Examples of workload or activity measures - number of registered cases, processed cases - patrol mileages for police officers

Target of applying the workload or activity measures - best fit for the people or organization, who have no complete control over final work - usually best fit for the street level employees and work

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Output Measures Measures the final products of activities

How to approach to define output measures - define the final products (outputs) produced from activities - specify measures to reflect the magnitudes and quality of the outputs - efficiency measures can be employed for standardization (ex, number of cars produced vs unit time consumed per a car production)

Examples of output measures - number of trainees finished - roads constructed - number of research report published - number of cases prosecuted

Target of applying the output measures - at the stage of completing a work or product - usually appropriate for institutional level - a certain point of a work completed - complement for outcome measures 14

Outcome Measures

the degree of pre-specified goals accomplished the quality of service provided the status of a problem which is predesignated to be solved

Approaches of defining outcome measures

Measures the effects, impact of the final products (output)

what are the goals/results intended to accomplish through a certain project or policy? what kind of changes are expected to be happen in the regional society

or citizens? what are the possible long term or short term adverse impact? what kind of results/impact are expected to the society or citizens when the project or policy is terminated? what are the factors which decide the quality of a service? (accessibility, timeliness, politeness, appropriateness etc.)

⇒ specify measures or indicators which can represent the above mentioned items 15

Outcome Measures

- satisfaction index - quality of services- number of crimes reported per 1,000 people- the ratio of employed trainees/trainees completed

Types of outcome measures

- employ at the stage of completing a work or product - usually appropriate for institutional or functional level impact

Examples of outcome measures

- completion rate of prescribed goals- quality of services : accessibility, timeliness, usefulness, politeness etc.- the condition of a certain region or citizens- survey result on customer satisfaction

Target of applying the outcome measures

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For whom the productivity information is needed - president, parliament, citizen : institutional level productivity info. mostly outcome info. - head of institution or department : department or personal level productivity info. mostly output or workload info.

Both top-down and bottom-up approach - Top-down for those who use productivity info. - Bottom-up for those who are evaluated

Unintended effects of applying productivity measures - measure only what can be measured - do only what are measured

Points To Be Considered

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Q&A

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Thank you

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For More Information

Dr. Shin KimThe Korea Institute of Public Administration

E-mail : skim@kipa.re.kr