The centre of government promotes a management culture that focuses on performance.
Performance measurement encourages comparison and competition between similar entities as a means of improving effectiveness and efficiency in service provision.
Identified individuals and teams are responsible and accountable for the achievement of performance goals.
Managers organise structured internal discussions to review financial and operational performance regularly through the year.
Responses to programme under-performance emphasise learning and problem solving, rather than individual financial rewards and penalties.
OECD Good Practices for Performance Budgeting
Good Practice 7: Incentives around the performance budgeting system encourage performance-oriented behaviour and learning.
Performance management culture
The main goal of performance budgeting efforts in OECD countries has been to support a shift to a performance-based ethos, whereby public officials instinctively respond to policy priorities, continuously improve the quality of public services, and seek value for money for the public.
While performance budgeting can create the appearance of such an ethos, the challenge is to change deeply rooted attitudes and behaviours and to encourage serious in-depth exchanges of ideas about how to actually improve performance. Governments engaged in performance budgeting should think of themselves as investing in a process of long-term cultural change and professionalisation.
Performance management regime for senior civil servants
Most OECD countries declare having some form of the specific performance regime for senior managers in civil service. A number of countries claim to have a performance regime in place, which is the same for managers and the rest of civil servants. Only seven countries declared non-existence of any performance regime for senior managers in civil service.1 The results of the survey clearly show that senior managers are treated as important actors in the performance management system and many countries find it worthwhile to design special HRM tools for them to improve performance.
Figure 10. Existence of performance regime for senior managers in civil service
Source: OECD (2016), Survey on Strategic Human Resources Management in Central/Federal Governments of OECD Countries, not published
The survey shows that the most commonly used HRM tools related to performance are performance agreements, with either ministers or top civil servants, performance appraisals and performance related pay. Each of those solutions is applied in more than half OECD countries. Slightly less popular are fixed-term contracts. The survey showed that senior managers in civil service are much more likely to be dismissed if they underperform, then to get promoted in the case of good performance. This result is however not astonishing, as it may result from the fact that, especially in position-based systems, any kind of vertical promotion requires organising open examination.
The existence of specific HRM tools, which aim at boosting performance, does not necessarily mean that they work in practice. OECD research revealed considerable risks related to this approach and it showed that the motivational value of PRP schemes was usually less important than expected. However, the processes accompanying PRP have produced positive results, as an impetus to improved goal setting, organisational cultural change and management innovation, and thereby to improved performance2.
Responses to under-performance
To bring about such a change in behaviour, governments need to demonstrate that under or over-performance will have tangible consequences. However, there is a risk that too strong a link between performance data and the budget may actually limit cultural change, with performance data being viewed as a threat rather than an opportunity to learn and improve.
At the extremes, if the system creates strong individual or collective incentives to achieve performance targets this can lead to damaging changes in behaviour in the form of gaming. Perversity carries the risk of serious political damage that may be out of proportion to the real problem: though rare and difficult to identify beforehand, data manipulation has resulted in intense political and media attention and fed public frustration. Manipulation of waiting lists for health services, for example, resulted in significant embarrassments for the United Kingdom government in the early 2000s and in the United States during the second Obama administration resulting in the resignation of the Secretary for Veteran’s Affairs. Most citizens care more about this single example of performance perversity than about the administration’s positive performance in other policy areas. A less headline-grabbing but still serious problem occurs when line ministries use data selectively to justify spending proposals.
Studies of how information about performance is used in public organisations suggests that the data influences decisions most clearly in organisational cultures that value innovation and a willingness to take risks (Kroll 2015) - traits not inherently prized in budget processes. OECD survey data (Figure 11) lends support to the view that softer management type responses are more implementable than harder budgetary responses, such as reducing funding or axing a programme. However, the survey also demonstrates that the overall level of responsiveness is low and the most common response is still “no changes”, suggesting that there is plenty of scope for countries to do a better job in this respect.
Figure 11. Consequences of poor performance by line Ministries/Agencies (average frequency)
Note: Data for Israel and the United States are not available.
Source: OECD (2018), OECD Performance Budgeting Survey.
Structured performance discussions
Evidence from country case studies shows that countries with long performance budgeting experience, such as Australia, the Netherlands and the United States have, to varying degrees, retreated from attempts to directly link performance to increases or cuts in the budget. They focus instead on encouraging more routine use of performance and budget information by line ministries and agencies to improve programme management.
In the United States Agency GPRAMA requires leaders and managers to use regular meetings, at least quarterly, to review data and drive progress toward key performance goals and other management-improvement priorities. For each APG, agency leaders conduct reviews at least quarterly to assess progress toward the goal, determine the risk of the goal not being met, and develop strategies to improve performance. There is research evidence that data-driven reviews, in which performance data are routinely discussed for management purposes are effective (Box 17).
Box 17. United States - Quarterly performance review
Another significant aspect of the US Government Performance and Results Modernization Act (2010) is that it requires formal routines for agency staff to discuss data. Agencies must hold quarterly reviews (sometimes called, data-driven reviews) of progress on agency priorities and other significant goals. The Chief Operating Officer is required to lead these reviews, and there is detailed discussion of progress on each goal by senior managers and the designated goal leader. The goal leader must track performance outcomes, understand why they rise and fall, and organise efforts for improvement.
Review with the appropriate goal leader the progress achieved during the most recent quarter, overall trend data, and the likelihood of meeting the planned level of performance.
Hold goal leaders accountable for knowing whether or not their performance indicators are trending in the right direction at a reasonable speed, and if they are not, for understanding why they are not and for having a plan to accelerate progress to the goal.
Hold goal leaders accountable for knowing the quality of their data, for having a plan to improve it if necessary, and for filling critical evidence or other information gaps.
Hold goal leaders accountable for identifying effective practices by searching the literature, looking for benchmarks, and analysing disaggregated data to find positive outliers among performance units.
Hold goal leaders accountable for validating promising practices with replication demonstrations or other evidence-based methods.
Review variations in performance trends across the organisation and delivery partners, identify possible reasons for each variance, and understand whether the variance points to promising practices or problems needing more attention.
Include evaluation staff to share and review performance information and evaluation findings; better understand performance issues that evaluation and research studies can help to address; and refine performance measures and indicators.
Include, as appropriate, relevant personnel within and outside the agency who contribute to the accomplishment of each Agency Priority Goal (or other priority).
Support the goal leaders in assuring other organisations and programmes are contributing as expected to Agency Priority Goals (or other priorities).
Identify Agency Priority Goals (or other priorities) at risk of not achieving the planned level of performance and work with goal leaders to identify strategies that support performance improvement.
Encourage a meaningful dialogue around what works, what does not, and the best way to move forward on the organisation’s top priorities, using a variety of appropriate analytical and evaluation methods.
Establish an environment that promotes learning and sharing openly about successes and challenges.
Agree on follow-up actions at each meeting and track timely follow-through.
Source: The White House, Office of Management and Budget (2018).
In Canada, accounting officers have a personal legal obligation to appear before parliamentary committees and answer questions on the management responsibilities of their department. A similar arrangement for accounting officers exists in Ireland. Also in Ireland, an annual agreement is signed between a department head and their relevant Minister outlining performance objectives. In New Zealand recent studies suggest that promoting collective rather than individual responsibility for performance was effective in delivering results in the cross-cutting “Better Public Service Results Programme” (Box 18) of the fifth National Government (2008-17).
Box 18. New Zealand - Creating Incentives to Achieve Cross-cutting Goals
Recent research from New Zealand shows that when it comes to tackling issues that cut across agency responsibilities holding public service executives collectively responsible for improvements is more effective than focusing on individual performance. From 2012 to 2017 New Zealand implemented a Better Public Service Results programme, with 10 key goals related to reducing welfare dependence, protecting vulnerable children, boosting skills and employment, reducing crime and improving interaction with government. NZ’s experience shows that appointing a lead individual to each of five groups set up to pursue clearly articulated social outcome improvements put too much emphasis on the person in charge, resulting in weaker feelings of commitment by other team members. A shift to collective responsibility - including the awarding of bonuses based on collective effort - in theory made freeloading easier, but produced better outcomes, pushing staff to ensure the group achieved something of value. On recent completion of the first five-year period there were dramatic improvements for all 10 results, despite some targets not being reached. The number of infants not vaccinated fell by two-thirds, for example. Other problems were cut in half, such as the number of children not enrolled in early childhood education and the number suffering from rheumatic fever. A total of 40 000 fewer working-age people received welfare payments over a three year period, thanks to more intensive and individualised case management and bureaucrats actively developing partnerships with local businesses.
Source: R. Scott and R. Boyd (2016)
In the United Kingdom permanent secretaries have long served as departmental “Accounting Officers”, responsible as individuals for the efficiency, economy and effectiveness of money spent by their organisation. Recently, new individual roles have been added for performance: a whole-of-government Chief Executive Officer, as well as enhanced performance-oriented responsibilities for Chief Financial Officers within each spending ministry.
In France for each programme, the minister appoints a manager. Programme managers are the linchpin of the new public management system, operating at the nexus between political and management accountability. Reporting to the minister, they help define the strategic objectives for their programmes. They are the guarantors that operational plans will go into effect and commit to the achievement of the associated goals. Annual Performance Plans express the commitments of the programme managers, presenting the strategies and objectives of each programme and justifying to Parliament programme appropriations and job requests. Programme managers organise management control and are allocated an overall amount to control. This gives them a great deal of freedom to choose where and how to allocate the financial and human resources they have available to meet their objectives. Their choices and the effects are reported in the APRs.
Notes
← 1. OECD (2016), Survey on Strategic Human Resources Management in Central/Federal Governments of OECD Countries, not published. The survey encompassed 35 OECD countries.
← 2. OECD (2005), Performance-related Pay Policies for Government Employees, OECD Publishing, Paris, https://doi.org/10.1787/9789264007550-en.