Public Management

Performance Management Wednesday, April 19, 2023

Hun Myoung Park, Ph.D.

Public Management & Policy Analysis ProgramGraduate School of International Relations

2

Organizational Goal

• Organizations are goal directed, purposive entities, and their effectiveness in pursuing those goals influences the quality of our lives and even our ability to survive.

• An organizational goal is a condition that organizations seek to attain.

3

Types of Goals

• Official goals – Mission statements and annual reports

contain what organization theorists refer to as official goals.

– Official value statements– Enhance organization legitimacy– Guide and motivate employee behavior

• Operative goals are relatively specific intermediate ends.

4

Goals of Public Organizations

• Goals are particularly vague and intangible compared to business firms.– What is the reason for this?– What implications might this have to

employee motivation, commitment, satisfaction?

5

Goal Ambiguity

• Vague mandates• Studies suggest that goal ambiguity may create

problems in motivating employees. • Goal ambiguity presents problems for

developing clear performance indicators. • In turn, this may raise questions about

accountability and lead to performance evaluations on the basis of rules.

6

Goal Achievement

• Assumes that organizations have goals, • that the goals can be discovered, • that the goals are at least somewhat stable, that

abstract goals can be converted into specific, objective measures, and

• that data relevant to those measures can be collected, processed, and applied in a timely and appropriate manner.

• However, these are problematic assumptions.

7

Some Hypotheses

• Organizations will perform better if goals are clarified and progress is measurable.

• Public organizations need to do much better. • Public organizations will do better if they

adopt business practices.• The federal nature of the U.S. system does

not matter much to goal attainment.– Multiple authorities at multiple levels agree on

goals.

8

Government Performance Project

• The GPP is a source of information about state management.

• Stated mission is to improve service to citizens by strengthening government policy and performance.

• The GPP systematically evaluates how well states manage their money, people, information and infrastructure—four areas critical to ensuring that states’ policy decisions and practices actually deliver their intended outcomes.

• Produces a report card

9

Conceptual Framework of the Government Performance Project

Management Subsystems

Financial Management

Human Resources

Management

Capital Management

Information Technology

Management

Leadership as Driver

Information as Connector

Managing for Results

Management Capacity Program

Delivery

Performance

Measurement

10

Organizational Effectiveness Dimensions and Measures

1. Overall effectiveness2. Productivity3. Efficiency4. Profit5. Quality6. Accidents7. Growth8. Absenteeism9. Turnover10.Job satisfaction11.Motivation12.Morale13.Control14.Conflict / cohesion15.Flexibility / adaptation

16. Planning and goal setting17. Goal consensus18. Internalization of organizational goals19. Role and norm congruence20. Managerial interpersonal skills21. Managerial task skills22. Information management and

communication23. Readiness24. Utilization of environment25. Evaluations by external entities26. Stability27. Value of human resources28. Participation and shared influence29. Training and development emphasis30. Achievement emphasis

Source: Campbell, 1977, pp. 36-39.

11

Balanced Scorecard

• Incorporates multiple dimensions and measures for assessing organizational performance and effectiveness

• A performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance.

12

Performance Measurement

• Why? Principal-agent problem coming from information asymmetry.

• Principal does not know well about agent’s ability, behavior (effort). No performance measurement in the Terminator

• No perfect link between effort, output, outcome, and reward.

• Dynamic (as opposed to static) series of game with strategies and learning involved

• Performance measurement should be “interactive dialogue” and evolve over time.

13

Performance Measurement

• Input: budget/agent’s effort

• Output: Performance indicators measured

• Outcome: organizational goal (value added)

• Feedback: incentive systems (reward and compensation systems)

• No perfect link among these components

• Noise, random error, measurement error…

14

Planning(Goal/budget/

indicators)

Organization

Input

Output

Outcome

Feedback

Evaluate

Measure

ImplementMonitor

Allocate resource

Obtain data

Goal, target,objective, result

Goal/budgetadjustment

Individual

Time/effortIndicators

Reward/panelty

Provide data

Consume resource

Goal, target,objective, result

15

Criteria of Measures

• Hatry (1980)• Validity and accuracy• Understandability• Timeliness• Potential for encouraging perverse behavior

(e.g., # ticket per police officer)• Uniqueness• Data collection costs• Controllability• Comprehensiveness

16

Types of Performance Measure

• Hatry (1980)• Cost measures• Workload-accomplished measures• Effectiveness/quality measures• Efficiency/productivity measures• Actual unit-cost to workload standard ratios• Efficiency measures and effectiveness quality• Resource utilization measures• Productivity indices• Pseudo-measures• Cost-benefit ratios• Comprehensive performance measures

17

Heinrich & Marschke (2010) 1

• “[T]he agent typically operates the program … that are defined by the principal to achieve organizational or program goals, …” (p. 187).

• “The assumptions that the principal cannot detect and therefore reward effort (or a given agent’s contribution to productivity), and that effort is costly to the agent, suggest that the agent will exert a suboptimal level of effort or will exert the wrong levels of effort across productive tasks, if paid a flat salary” (p.188)

18

Heinrich & Marschke (2010) 2

• “Performance information systems and documentation of performance are not an ’end’ but rather a means for engaging in policy and management change” (p.186).

• “Any performance measure… will also capture the effects of random, uncontrollable events, or environmental factors on the performance outcome” (p. 188).

19

Heinrich & Marschke (2010) 3

• “Moynihan suggests that elected officials and public managers have been more likely to realize the “symbolic benefits” of creating an impression that government is being run in a rational, efficient, and result-oriented manner” (p.186).

20

Heinrich & Marschke (2010) 4

• According to Stone (1997) and Moynihan (2008), “All performance information is subjective; any number can have multiple interpretations depending on the political context, because they are ‘measures of human activities, made by human beings, and intended to influence human behavior.’” (p. 190)

21

Heinrich & Marschke (2010) 5

• “Assigning work so that one group of agents performs only measurable task and placing another group of intrinsically motivated workers in positions where performance is difficult to measure would exploit the motivating power of incentives for some workers and attenuate the moral hazard costs from the lack of incentives for the others” (p. 203).

22

Heinrich & Marschke (2010) 6

• “The usefulness of this strategy depends, of course, on the ability to identify intrinsically motivated workers and to facilitate a structural or functional separation of work tasks, which may be more or less feasible in some public sector settings” (p. 203).

23

Heinrich & Marschke (2010) 7

• “An incentive designer’s understanding of the nature of a performance measure’s distortions and employee’ means for influencing performance is typically imperfect prior to implementation. It is only as performance measures are tried, evaluated, modified, and/or discarded that agents’ responses become known” (p. 203).

24

Heinrich & Marschke (2010) 8

• “[A] complicating factor is that performance measures can be gamed. Agents …, although their day-to-day experience with the technology of production, come to know the distinct weaknesses or distortions of performance measures and how they can exploit them.” (p. 203).

25

Heinrich & Marschke (2010) 9

• “If it takes the agent time to learn how to game a new performance measure, an equilibrium solution may be a periodic revision of performance measures or a reassignment of agents.” (p. 203)

26

Heinrich & Marschke (2010) 10

• “Depending on the relative speeds of principal and agent learning and the extent to which performance measures degrade over time, this dynamic to measurement systems will not necessarily end” (p. 203).

• “If the principal learns faster than the agent, the usefulness of a performance measure is more likely to increase, but if the agent learns faster how to manipulate a measure, its usefulness will decline and the measure may ultimately be discarded” (p. 203).

27

Moynihan (2008) 1

• “Performance management doctrine is based on the logic that the creation, diffusion, and use of performance information will foster better decision making in government, leading to dividends in terms of political and public accountability, efficiency, and budget decisions” (p. 10).

28

Moynihan (2008) 2

• “[E]lected officials are rarely interested in performance information use. Performance management reforms are used as symbolic tools to express frustration with bureaucracy. Legislatures tend to regard performance initiatives from the executive branch with suspicion, and public employees can become cynical about the latest version of performance management” (p. 10).

29

Moynihan (2008) 3

• “The adoption of performance management reforms is due to its symbolic value to elected officials and professional value to central agency actors” (p.14).

• “Performance management is attractive because it communicates to the public that elected officials share their frustration with inefficient bureaucracies and are holding them accountable, saving taxpayer money, and fostering better performance.” (p. 14).

30

Moynihan (2008) 4

• “Reforms can also be used to try to convince the public that the government is being run efficiently and competently, making incumbents deserving of reelection and the public purse deserving of taxpayer monies.” (p.14).

• “Elected officials might also perceive potential benefits in terms of policy control by using performance information as a means of specifying goals and holding bureaucrats accountable, …” (p. 14).

31

Ten Ways of Rethinking 1

• Moynihan (2008) Chapter 10

1. Performance information systems are not performance management

2. The symbolic motivations for adopting performance management do not spell doom.

3. Performance information is not objective

4. The key challenge for performance management is fostering performance information use.

32

Ten Ways of Rethinking 2

5. Change our expectations about how performance information succeeds.

6. Use of performance information occurs mainly at the agency level.

7. Build agency-centered systems of performance management

8. Performance management gives agencies a tool to engage in policy change

9. Performance management is less important to performance than many other organizational factors

33

Ten Ways of Rethinking 3

10.Performance management depends on other organizational factors to succeed

34

My Experiences

• Incremental approach rather than comprehensive approach to give sufficient time for “mutual adjustment” (Don not surprise workers)

• Performance measures vary across individuals and need agreement of those who will be evaluated (Cooperate each other)

• Use performance to motivate employees as a way of exchanging contribution and rewards

• No direct and immediate link between performance and incentive (in particular, disincentive) Do not intimidate workers