Performance Measurement
June 26, 2014

Have we built a system that contains a paradox?

Performance measurement and public reporting are intended to achieve two complementary objectives: improve accountability and improve performance. Managers in a well-functioning performance management system are expected to have the latitude to make changes to improve performance. The emphasis is on managing for results. Elected officials are at the apex of the performance management cycle that ties organizational decision-making and performance results to political decision-making and back to organizational decision-making.

Requiring performance measures for public sector organizations that reflect their strategic objectives and align upward is intended to be a means of demonstrating accountability. Coupled with periodic reports that are meant to reflect actual achievements, public performance results are expected to be used by decision-makers, including elected officials, to allocate and re-allocate resources. The production of performance information is intended to be part of a hierarchical performance architecture that feeds information into an incentive system that can reward or sanction those delivering programs to taxpayers.

Does this performance management cycle work and, if so, under what circumstances?

In Britain during the Blair years (2001-2005 especially) high-stakes performance reporting was widely implemented, and meeting targets was a high priority. Bevan and Hood (2006) called this regime the “targets and terror” approach to performance management. Political decision-makers used the results (as did the media) and there is evidence that in some sectors (e.g., health care) performance improved.

But focusing on key measures and targets also caused unexpected outcomes that were embarrassing to the government. Post-2005, Britain is still committed to performance reporting but the system is less tied to rewards and sanctions. There are targets but no terror.

What differences have performance measurement and reporting made in Canada?

Generally the provincial and federal governments require results-focused performance measurement and public reporting. Over half of the provinces have legislated such a requirement. Unlike Britain, we have typically not built high-stakes performance measurement and reporting systems. Instead, performance is measured but there is scant evidence that we have tied performance results to decision-making, particularly by elected officials. Existing research suggests that our elected officials, like officials elsewhere, have tended to use performance reports to inform constituents of their accomplishments and to demonstrate a broad, arguably symbolic, support for public accountability.

If elected decision-makers are not using performance reports to make substantive decisions, are managers using performance information to improve performance?

Anecdotally, the picture is mixed. In other countries where systematic research has been done, the focus on alignment of objectives upward has created a culture of compliance. Gill (2011) and his colleagues surveyed 1,700 New Zealand public managers and discovered that using performance results mostly amounted to ensuring that results met targets. They suggested that in New Zealand the performance management system has re-created Weber’s “Iron Cage” wherein the imperative is to concentrate control in the hands of those at the apex of the structure.

But in the New Zealand survey, some managers reported creating their own performance measures that were independent of existing corporate indicators. Used “off line” to monitor and manage, these measures were decoupled from those used to demonstrate accountability.

Is decoupling a broader phenomenon? Johnsen (2005) suggested two different models for how performance measurement could relate to organizational objectives. One model is our familiar upward-focused alignment model. But Johnsen suggested that to get managers to use performance information it might make more sense to encourage them to decouple a set of performance measures from the public measures aligned with the organizational objectives. This second model encourages a formative/learning view of performance information for internal uses. Keeping organizational performance measures for external reporting purposes may be necessary, but tying those measures to performance deep into the organization may result in a culture of control.

Here is the paradox. In our enthusiasm to improve accountability and “make the managers manage” to a limited set of targets, we may have designed performance measurement and reporting systems that drive out innovative performance improvement efforts. Moynihan (2008) pointed out that when performance management and accountability systems are implemented, managers usually do not get increased latitude to manage for results. Instead, there is a layering of performance-focused measurement and reporting requirements on top of existing process-focused accountability expectations.

As Canada faces increasingly complex global challenges, we are left with three questions: How do managers actually use performance information in their roles and responsibilities? Are managers given latitude and resources to create their own “off line” performance measures – ones that are effectively decoupled from corporate systems? And if such systems exist, do they make a difference to the effectiveness and agility of organizations?

 
References
Bevan, G., and Hamblin, R. (2009). Hitting and missing targets by ambulance services for emergency calls: Effects of different systems of performance measurement within the UK. Journal of the Royal Statistical Society. Series A (Statistics in Society), 172(1), 161-190.

Bevan, G., and Hood, C. (2006). What’s measured is what matters: Targets and gaming in the English public health care system. Public Administration, Volume 84 (3), 517-538.

Gill, D., editor. (2011). The Iron Cage Recreated: The Performance Management of State Organizations in New Zealand. Victoria University, Wellington: Institute of Policy Studies.

Johnsen, A. (2005). What does 25 years of experience tell us about the state of performance measurement in public policy and management? Public Money and Management, Volume 25 (1), 9-17.

McDavid, J. (2011). The Iron cage recreated: The performance management of state organizations in New Zealand. Book review. Canadian Public Administration, Volume 54 (4), 598-602.

McDavid, J. and Huse, I. (2012). Legislator uses of public performance reports: Findings from a five-year study. American Journal of Evaluation, Volume 33(1), 7-25.

Moynihan, D. P. (2008). The Dynamics of Performance Management: Constructing Information and Reform. Washington, DC: Georgetown University Press.

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