The Riskiness of Public Sector Performance Measurement: A Review and Research Agenda

• Published date: 01 August 2014
• Author: Vedran Vranic,James Guthrie,Suresh Cuganesan
• DOI: http://doi.org/10.1111/faam.12037
• Date: 01 August 2014

Financial Accountability & Management, 30(3), August 2014, 0267-4424

The Riskiness of Public Sector

Performance Measurement: A

Review and Research Agenda

SURESH CUGANESAN,JAMES GUTHRIE AND VEDRAN VRANIC∗

Abstract: Public sector performance measurement (PM) practices can be risky. It

is imperative that research engages with the riskiness of PM and how this might be

reduced. To help move towards a less risky state of public sector PM, where benefits

outweigh negative potential, this paper reviews studies on PM risk to ascertain what

existing research indicates about (a) the risks of PM (b) the conditions in which

the risks of PM are more likely to manifest, and (c) the approaches that mitigate

the risks of PM. Based on this, the paper outlines a way forward for public sector

PM research. Overall the paper makes a number of contributions. First, it brings

together a disparate and fragmented field in reviewing studies examining the risks

of PM. Second, the paper reframes the research question that public sector PM

risk research and public sector PM studies more broadly should engage in. Third,

specific suggestions are offered in terms of how future research might proceed in

a coordinated manner, examining and informing practice where PM is part of an

integrated and enabling control system for strategising and managing in the public

sector, and where citizen-centric PM is utilised as part of multiple evaluation modes

to more effectively support accountability to external constituents.

Keywords: risk, performance measurement, public sector

INTRODUCTION

Initiatives to introduce, refine and/or expand public sector performance

measurement (PM) regimes show no signs of abating (Lapsley, 2008). While

PM can deliver numerous benefits (Osborne and Gaebler, 1993), it also carries

∗The first author is from the University of Sydney Business School. The second author is

from the Department of Accounting and Governance, Macquarie University; the Department

of Management, University of Bologna; and Honorary Professor, the University of Sydney

Business School. The third author is from the Faculty of Business and Enterprise, Swinburne

University of Technology. The authors gratefully acknowledge the helpful comments of the

anonymous referees and the editors of the issue.

Address for Correspondence: Suresh Cuganesan, The University of Sydney Business School,

University of Sydney, NSW, Australia.

e-mail: suresh.cuganesan@sydney.edu.au

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280 CUGANESAN, GUTHRIE AND VRANIC

with it significant potential for unintended negative consequences. PM practices

can be ‘risky’ and potentially a fatal remedy (Power, 2004a), causing scandals

and so called ‘perverse outcomes’ in the public sector.

As public sector research increasingly concerns itself with issues of risk it

is imperative that we do not overlook the riskiness of PM and how this might

be reduced.1We argue this for two main reasons. First, examples of PM risks

manifesting in the public sector are many. Given this, it is reasonable to hold

the position that we as a research community have not done enough to provide

insight on how the riskiness of PM might be best managed. Second, issues of risk

and PM can be linked, as Power (2004b) also notes: ‘the concept of risk is being

enrolled in a new focus on outcomes and performance’ (p.13, emphasis in original).

Hence we argue that public sector research needs to consider how less risky PM

practices might be attained.

In achieving a less risky state of public sector PM we need to establish the

current state of knowledge before mapping a way forward. Thus we pose in this

paper the following questions: What does existing research tell us about (a) the risks

of PM (b) the conditions in which the risks of PM are more likely to manifest, and (c) the

approaches that mitigate the risks of PM? Reflecting on the answers to these questions,

we articulate an agenda for future research that, hopefully, moves us towards

a state where the benefits of public sector PM practices outweigh its negative

potential.

The paper is structured as follows. The next section explains our conceptual

approach to the review while the third section outlines our method. The fourth

section presents the results of the review of prior research organised into

different risk categories while in the fifth section we outline a research agenda

to guide the way forward. We conclude our paper by discussing both the paper’s

contributions and its limitations.

REVIEWING THE RISKINESS OF PM IN THE PUBLIC SECTOR

Recent literature reviews either wholly or partly on the topic of public sector PM

call for multi-theoretical perspectives and diverse research methods (van Helden

et al., 2008; and Goddard, 2010), a focus on developing and evaluating new

techniques and studies that examine successful implementation and providing

guidelines for PM practice (van Helden and Northcott, 2010; and Jackson, 2011).

Collectively, these reviews suggest the type of objectives that PM research

should pursue and the manner in which PM research should occur. We seek

to complement these broad prescriptions with specific suggestions (see the fifth

section) for future research on the riskiness of PM.

Focusing specifically on PM and risk, we were interested in typologies of

PM risks developed by prior studies. A search revealed sporadic efforts with

the more notable of these comprising lists of thirteen dysfunctional effects

(Bouckaert and Balk, 1991), eight unintended behavioural consequences (Smith,

1995) and seven risks of PM (de Bruijn, 2002).2Examining the accompanying

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