Performance Management in the Public Sector: The Ultimate Challenge

• Author: Michela Arnaboldi,Irvine Lapsley,Ileana Steccolini
• Date: 01 February 2015
• Published date: 01 February 2015
• DOI: http://doi.org/10.1111/faam.12049

Financial Accountability & Management, 31(1), February 2015, 0267-4424

Performance Management

in the Public Sector: The Ultimate

Challenge

MICHELA ARNABOLDI,IRVINE LAPSLEY AND ILEANA STECCOLINI∗

Abstract: Performance Management is the challenge confronting public service

managers. However, the enduring research focus on performance measurement in

public services, without resolution, does not offer neat solutions to performance

management in public services. This drawback of measurement difficulties has not

abated interest in performance management. But there are significant adverse

outcomes associated with the clumsy use of performance management systems in

public services, particularly negative effects on staff morale. The lack of ready-made

answers to performance management makes this task complex and demanding for

public service managers. This paper identifies critical dimensions of effectiveness in

performance management systems.

Keywords: performance management, complexity, public services, employee im-

pacts, management challenges

INTRODUCTION

There are relentless pressures on managers in public services to act on the

quality of their services. The idea of ‘more with less’ has become a slogan,

as managers seek to maintain or improve the quality of service delivery. This

phenomenon is pervasive – an international trend from which there is no escape

for public service managers. This global interest has attracted the attention

of key world institutions such as the OECD (see Perrin, 2003; and Curristine,

2005, 2007 and 2008) on the fostering of performance budgeting and monitoring

systems) and the World Bank (see the Talbot, 2010, study of UK performance

management for the World Bank as the promulgation of best practice). And yet

∗The Special Issue Editors are respectively from Politecnico di Milano; IPSAR, University of

Edinburgh Business School; and Bocconi School of Management.

Address for correspondence: Irvine Lapsley, IPSAR, University of Edinburgh Business

School, Edinburgh EH8 9JS.

e-mail: Irvine.Lapsley@ed.ac.uk

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2ARNABOLDI, LAPSLEY AND STECCOLINI

there is no single solution as the public sector has many variations in scope and

features in the 196 countries of the world, all shaped by economic performance,

political philosophy, the involvement of external agencies and demands for

public services (CIMA, 2011). These layers of complexity complicate, but do

not lessen the interest in, and need for, performance management systems in

public services.

The financial crisis of 2007–2008 is still unfolding and we do not yet know

its outcome. The fiscal pressures have intensified the need for making best use

of reduced resources in public services. This is in the midst of an uncertain

environment in which traditional paradigms for public policy have experienced

policy reverses (Coen and Roberts, 2012). However, the genesis of performance

management systems is the global impact of three decades of the new public

management (NPM) phenomenon which drives the focus on results oriented

public services. The global financial crisis has accentuated the longstanding

need for effective performance management of public services. There has been

considerable research activity on performance management systems across a

range of services to the extent that we may have a performance measurement

industry (Johnsen, 2005). Nevertheless, that research effort is diffuse and has

not been consolidated into a coherent body of thought (Broadbent and Guthrie,

2008). Indeed, the activity of performance management has been characterised

as risky for public service managers (Cuganesan et al., 2014).

This paper contributes to the debate on performance management by offering

a nuanced interpretation of the nature of this activity in public services. First,

this paper discusses how complexity in public services may be theorised. Then it

addresses the topic of performance management in public services by examining

three dimensions of processes and impacts: (1) The key pitfall of performance

management (2) Performance technologies: An accounting problematic and

(3) Performance management in a complex setting. The paper concludes with

closing comments on the challenges facing performance management in public

services and with a future research agenda.

THEORISING COMPLEXITY

The public sector is widely recognised as a complex setting for study. The public

sector has been described as an area of inherent complexity (Lapsley and Skærbæk,

2012), stemming from the location of managerial culture in a sector which

experiences many political influences. This, in turn, may confound managerial

discretion and complicate levels of accountability, especially in a sector which is

repeatedly reformed, with uncertain outcomes, and where expectations are high

on the delivery of social justice, social responsibility, equity in society, democratic

entitlements and pressures for social change.

So, the concept of complexity abounds in the public sector. But how can we

study this phenomenon for public services? There is now an increasing focus

on the idea of the development of complexity theory which has captured the

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