Balancing stick and carrot for government KPIs

Regardless of the rhetoric you hear in election campaigns, the efficient delivery of government services typically has only an indirect link with politics or politicians.

It actually depends on effective management practices. Of course politicians set the policy and legislative boundaries, but managers within the various agencies and statutory bodies are responsible for designing and delivering the programs.

I think it is safe to say that efficient, well run government programs are unlikely to be reported by journalists, or noticed by the general public. We all remember the disasters, and there is plenty to learn from the Federal Senate investigation into the home insulation scheme.

But when you look at the bigger picture, the most an efficient government program can hope to achieve is survival – not recognition. If you think about it in terms of management style – there is plenty of stick, and not a carrot in sight.

Carrot and Stick

In corporate environments, business leaders are used to measuring projects by financial projections – usually focusing on profitability, net present value, and earnings per employee.
Measures which make benchmarking easy when comparing multiple competing opportunities. Many business investments are heavily influenced by the effect of a project on share price, tax liabilities, and stock market analysts. Few of which are relevant to government services or projects.

There has been extensive research into executive remuneration, and it has long been recognised that corporate executives need “skin in the game” – so remuneration packages are designed to reward based on business KPIs being achieved. Unfortunately, there are plenty of examples of corporate incentives being inappropriately designed, with shareholder interests being trampled. The financial services industry being a particularly ugly and regular offender, with plenty of carrot, and little risk of the stick.

Performance indicators for public hospitals in Australia
Australian Federal Government Performance Indicators for Public Hospitals

On the other hand, government services typically fill gaps that profit seeking businesses choose not to address. If businesses were willing to provide low cost universal health care to every Australian – across the nation – then I doubt senior citizens would complain about government hospital waiting lists for hip replacements.

So, we have a contrast of two systems. Businesses that reward and measure individual performance based mostly on profit related financial measures, versus government agencies which typically focus benchmarking efforts on the volume of service delivery, and adherence to budgeted expenses.

Clearly, simply transplanting business style KPIs into a government services scenario is going to cause problems. This is one of the challenges that causes major problems when governments try to privatise government service delivery.

At it’s heart, it is an issue of benchmarking and trust.

If financial measures are not a key decision making criteria for policy makers, then stakeholders need to agree on transparent measurements that allow comparison between programs run by different government agencies. Transparency and measurability are crucial, as well as picking KPIs that can be measured frequently at an affordable cost.


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