Performance Management, Managerial Quality and Government Performance: A Cross-Country Quantitative Analysis

This paper explores whether and how performance management practices adopted by national governments are related to the specific outcomes they are designed to achieve, particularly, improved government effectiveness and... [ view full abstract ]

This paper explores whether and how performance management practices adopted by national governments are related to the specific outcomes they are designed to achieve, particularly, improved government effectiveness and performance. We develop an approach suggesting that performance management mechanisms primarily affect the quality of management so that mid-level and street level bureaucrats feel empowered. These improvements are then translated to greater effectiveness and better performance of government ministries and public organizations. The research model is based on the core idea of strategic management, namely, that inputs and activities lead to outputs, and outputs lead to outcomes. We question if and to what extent structural changes such as resource availability, decentralization and coordination initiatives play significant role in these dynamics.
Referring to OECD countries, on the macro level many governments, as well as international organizations, see performance management mechanisms as essential tools to reform and modernize the public sector, and on the organizational level, specific organizations adopt such practices. Specifically, based on data and measures collected by international organizations (notably the OECD and the World Bank), we created a data set for 37 OECD countries that includes numerous items. These items allow us to investigate the variables mentioned above and perform advanced statistical analyses of them.
The findings support the core idea of our research model that inputs and activities influence outputs, which then influence outcomes. Performance management mechanisms and activities designed to create structural changes primarily influence managerial quality and government effectiveness, which then gradually impact trust in government. While performance management mechanisms clearly have an effect on management quality and government effectiveness, other structural changes such as decentralization, coordination initiatives and re-direction of resources either do not have an impact on outputs and outcomes or have only an indirect impact. Since the level of trust in government probably also reflects the subjective evaluation of the quality of governmental services and the confidence in the good conduct and intentions of the government, we may apply our findings to a broad set of outcomes rather than solely referring to trust in government.
Our core result focuses attention on managerial quality and government effectiveness both as the main target that should be achieved by performance management and other structural reforms, and as a main determinant of public sector performance. This analysis implies that performance management mechanisms primarily promote managerial processes and an organizational culture that highlights leadership, accountability, planning, evaluation, transparency and good conduct, as well as professionalism and managerial autonomy. This means that performance management and other structural changes influence structural outcomes only through the mediation of behavioral variables that essentially stress subjective interpretations. Therefore, we should be very careful not to expect specific common organizational outcomes, such as efficiency or profit, to result from these changes, because such mechanisms are not necessarily designed to achieve them.
We conclude that when planning reforms, careful attention should be given to behavioral factors, such as motivation, incentives, interpretations and learning.