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“The Vocabulary of Performance”
ICGFMDecember 2-4, 2009
CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of The World Bank is strictly prohibited
Jim BrumbySector Manager, Public Sector & Governance
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Table of Contents
• A Transition of Complexity
• Defining Performance
• Inputs, Outputs, Outcomes, Indicators
• Output and Indicator Characteristics
• Is our concern solely with outputs?
• Results Chain
• Basic Concepts: Performance Budgeting
• Objectives of Performance Budgeting
• OECD Practices in Performance Budgeting
A Transition of Complexity
Control & complianceo Rules governedo Limited flexibilityo Non-preventiveo Negative focuso Control of individuals
Performance & Accountabilityo Mission driveno Customer driveno Employee responsiveo Flexibleo Preventiveo Positive team focus
A significant cultural & institutional change
Performance is for the most part determined by where you sit– As a purchaser of a service, your interests are typically different from those of the supplier of the service
o Buyer of car; versus manufacturer of car– As a regulator, your interests are typically different from those of the regulated
o Compliant behavior versus lightness of burden– In some cases, parties may have interests as both purchasers and suppliers (e.g. co-operatives)
Government performance is complex in part because of the variety of interests– Standard problems of government production
With different degrees of clarity, performance budgeting systems attempt to address these various interests
– Institutional fabric is importanto Westminster; Presidential; other Parliamentary etc
Gauging Interests
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Inputs, Outputs, Outcomes, Indicators
Inputs: the resources used by government to produce outputs. • Inputs include the labor (the range of skills, expertise and knowledge of employees), capital assets
(including land and buildings, motor vehicles and computer networks), financial assets, and intangible assets (such as intellectual property) which are used in delivering outputs.
Outputs: the goods or services (usually the latter) which government agencies provide for citizens.
• The concept of outputs is not confined to tangible goods and social services delivered directly to citizens. The concept also include more intangible flows of influences on the surroundings from agencies, institutions and other entities delivering on public policies.
• Outputs are potentially largely controllable by government agencies and measurable either quantitatively or qualitatively. Thus outputs can be used for performance management more easily than outcomes.
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Outcomes: the effects on society of outputs from governmental entitiesOutcomes – whether intended or unintended – are not usually completely controllable by governments. The degree of control depends on the influence of extraneous factors on the goal in question, the effectiveness of implementation and the quality of the policies for reaching the goal.
Indicator: Quantitative or qualitative variable that provides a simple and reliable means to measure achievement, to reflect the changes connected to actions undertaken.
Contextual Factors
Structural, institutional,
and managerial
arrangements
Results Chain (Production Process)
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Efficiency: indicates the relation between the deployed resources (input) and the delivered products or service (output) (I/O).
Effectiveness: refers to the cause and consequence relation between output and outcome and the extent to which the intervention’s objectives were achieved.
Glossary of Key Terms in Evaluation and Results Based Management. Available from: http://www.aidharmonization.org/download/212150/glossary_of_aid_monitoring_terms.pdf
Source: Dries Verlet and Carl Davos, “Evaluation of performance in the public sector: end or mean?” EGPA Study Group on Evaluation, 2008.
Inputs ActivitiesIntermediate OutcomesOutputs
Final Outcomes
Output and indicator characteristics
Quantity the quality or standard of output expected
Quality the quantity of output to be delivered
Cost the cost of output delivery
Timeliness the timeframe for delivery of the output
Location the physical location where the output will be delivered
Externally focused The output describes a distinct product or service.
Controllable Output specifications appropriately reflect the extent of control over the delivery of each output.
Comprehensive The outputs should incorporate all of the core outputs that were delivered by the entity. This includes outputs where delivery has been subcontracted to another party. It also may include all outputs funded by parties other than ratepayers or taxpayers — for example, outputs funded through user charges.
Measurable Output specifications provide clear descriptions and standards against which actual performance can be judged.
Informative Output descriptions are sufficient to meet the information needs of a relatively new or unfamiliar user of the information.
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Basic Concepts – Performance Budgeting
Performance Budgeting – performance impact of resource allocations and use in order to hold line ministries accountable and efficiently allocate resources.
Weakest form
Moderate form
Strongest form
• Presentational performance budgeting Instrument of transparency
• Performance informed budgeting Instrument of accountability Assists with efficiency Begins more earnest efforts to define, measure, improve
• Direct performance budgeting An unambiguous contractual mechanism
Key Point: One system may have all these, depending on the characteristics of the production process, the nature of the services being supplied, and the preferences and capabilities of the main players
Objectives of Performance Budgeting
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• Create stronger links between allocated public resources and outputs/outcomes of the public sector
• Impact on decisions in resource allocation by using performance information • Produce and report relevant performance information
• Assist three objectives of public expenditure management 1. Allocative efficiency by challenging the composition of public expenditure with respect
to social needs and priorities 2. Operational efficiency by encouraging cost-effective service delivery and value for
money 3. Aggregate fiscal discipline by affecting the level of public expenditure through
allocative and operational efficiency
The logic is inexorable:
Many countries aspire to performance budgeting;
implementation is a journey rather than a
destination.
Key message: Using performance information in budget decision-making ex-ante (expected targets) and/or ex-post (actual results)
OECD practices in performance budgeting:Spectrum of models
Program budgeting Establish program results along
with funding requirements through the budget process
Disaggregate them to the front-line level
Program classification based on multiple objectives of individual government agencies ( generally corresponds to organizational boundaries)
France, Korea, U.S.
Program budgeting Establish program results along
with funding requirements through the budget process
Disaggregate them to the front-line level
Program classification based on multiple objectives of individual government agencies ( generally corresponds to organizational boundaries)
France, Korea, U.S.
Internal-hierarchical Contractual
Pressure on agencies to boost performance
Improve allocative decisions within agencies
The agency model Specified outcome/output targets linked to
the budgetPSAs (UK), decentralized results framework
(Netherlands, Norway)
Purchaser-provider budgeting Budget agencies are competitive suppliers
of the public sector outputs (quasi-market) Explicit performance contracts with
specified quantity, quality and price of outputs
Australia, New Zealand
Formula-based budgeting Resources are allocated according to a
specified formula Usually used in sectors (e.g. health)
Pressure on agencies to boost performance
Improve allocative decisions within agencies
The agency model Specified outcome/output targets linked to
the budgetPSAs (UK), decentralized results framework
(Netherlands, Norway)
Purchaser-provider budgeting Budget agencies are competitive suppliers
of the public sector outputs (quasi-market) Explicit performance contracts with
specified quantity, quality and price of outputs
Australia, New Zealand
Formula-based budgeting Resources are allocated according to a
specified formula Usually used in sectors (e.g. health)
Performance measures benchmarking program evaluation expenditure reviews CBA
Performance measures benchmarking program evaluation expenditure reviews CBA
Gauge
nonfinancial
performance
Various interests As funder/purchaser As regulator As owner
Need intertemporal consistency
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End
Thank You.
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