Challenging the NPM Ideas About Performance Management: Selectivity and Differentiation in Outcome‐Oriented Performance Budgeting

• Author: Berend Kolk,G. Jan Helden,Henk J. Bogt
• Published date: 01 August 2015
• DOI: http://doi.org/10.1111/faam.12058
• Date: 01 August 2015

Financial Accountability & Management, 31(3), August 2015, 0267-4424

Challenging the NPM Ideas About

Performance Management:

Selectivity and Differentiation in

Outcome-Oriented Performance

Budgeting

HENK J. TER BOGT,G.JAN VAN HELDEN AND BEREND VAN DER KOLK∗

Abstract: This paper shows how the performance budget of a local government

organization, in this case a province in the Netherlands, can be attuned to the specific

task characteristics of the programmes in these budgets. Three ways of alignment

are suggested: differentiating between standardized and complex programmes;

focussing on the politically most relevant programmes in order to avoid information

overload; and distinguishing between the types of performance information in terms

of the role of the province in the programme (facilitator versus executor) and

the stage in the policy making cycle (policy development, policy elaboration or

policy execution). These suggestions challenge the generally straightforward NPM

rationale of performance budgeting, in which standardized outputs are directly

related to resources. Our empirical research shows on the one hand that the

redesigned programme budget based on the above principles received substantial

approval of its users, i.e., the provincial councillors. On the other hand, as regards

the use of this programme budget the picture is rather diffuse, i.e., the majority

of the councillors indicate that they use the information rather intensively, but its

formal use in official Council and Council committee meetings remains limited.

Keywords: NPM, performance budgeting, performance management, programme

differentiation, the Netherlands

∗The first and the third authors are from the Department of Accounting, Faculty of Economics

and Business, University of Groningen, the Netherlands. The second author is Professor

Emeritus at the Department of Accounting, Faculty of Economics and Business, University of

Groningen. They are indebted to Bob Scapens and the anonymous reviewers for their helpful

comments on previous versions of this paper.

Address for correspondence: Henk ter Bogt, University of Groningen, Faculty of Economics

and Business, P.O. Box 800, 9700 AV Groningen, the Netherlands.

e-mail: h.j.ter.bogt@rug.nl

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288 TER BOGT, VAN HELDEN AND VAN DER KOLK

INTRODUCTION

One of the aims of the recent public sector reforms in the Netherlands has

been to improve the budgetary information available to elected politicians

and enable them to execute their budget allocation, budgetary control, and

accountability tasks more effectively. Performance budgets, a type of budgetary

document in which the budgeted performances in terms of outputs or outcomes

are linked to the planned expenses, are often advocated as part of these

reforms.

The introduction of performance budgeting implicitly assumed that the

potential users, particularly the members of Parliament or the local government

councillors, would make use of this budgetary information in a rational manner.

Rationalism is an important element in the New Public Management approach

(NPM), which has been underlying the more recent initiatives to increase the

focus on performance in the public sector’s management and budgeting activities

(Gruening, 2001). However, the assumption of a rational use of performance

information is contestable, as shown by the research on politicians’ use of

performance information in general and that of performance budgeting in

particular (ter Bogt, 2004; Sterck, 2007; Taylor, 2009; see also van Helden et al.,

2008). This research primarily emphasizes the reasons why the politicians are

hesitant in making use of performance information in the budgetary cycle. They

seem to prefer informal to formal information, i.e., performance information in

official reports (ter Bogt, 2004) and, if available, they use the latter primarily for

accountability rather than for steering and controlling purposes (Taylor, 2009).

In addition, sometimes an internal use of performance information is hindered

by technical complications (Taylor, 2009). Finally, there are indications that

politicians often lack the expertise to make a proper use of more advanced

accounting information, such as accrual-based data (Ezzamel et al., 2005; and

Hyndman, 2008).

Other than examining the reasons for the limited use of performance

budgeting information by politicians, our research particularly discusses the

initiatives aimed at enhancing the extent to which politicians value and use

the performance information in the budgets (and the related annual accounts).

The idea underlying these initiatives – which fit the NPM concept of rational

management – is that the more politicians come to value the performance

information included in the budgets, the more they might be inclined to use this

information in their decision-making and control activities.1

The term ‘performance’ can have many different connotations (Wholey, 1999,

pp. 289–90; and Jackson, 2011, p. 15). In the Dutch government sector, for

example, it is primarily used for activities, outputs and outcomes. Although in

practice information about activities and outputs can be relevant, in this paper

the performance concept particularly relates to outcomes, the primary focus of

the so-called programme budgets of the Dutch provinces. Our research setting

was a province in the Netherlands predominantly engaged in non-standardized

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