The Use of Performance Measurement Systems in the Public Sector: Effects on Performance

Posted: 25 Jun 2013 Last revised: 17 Jul 2014

See all articles by Roland F. Spekle

Roland F. Spekle

Nyenrode Business University

Frank Verbeeten

University of Amsterdam - Faculty of Economics and Business, Amsterdam Business School

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Date Written: June 23, 2013

Abstract

We study the use of performance measurement systems in the public sector. We hypothesize that the way in which these systems are being used affects organizational performance, and that these performance effects depend on contractibility. Contractibility encompasses clarity of goals, the ability to select undistorted performance metrics, and the degree to which managers know and control the transformation process. We expect that public sector organizations that use their performance measurement systems in ways that match the characteristics of their activities outperform those that fail to achieve such fit. We test our hypotheses using survey data from 101 public sector organizations. Our findings indicate that contractibility moderates the relationship between the incentive-oriented use of the performance measurement system and performance. Using the performance measurement system for incentive purposes negatively influences organizational performance, but this effect is less severe when contractibility is high. We also find that an exploratory use of the performance measurement system tends to enhance performance; this positive effect is independent of the level of contractibility. The effectiveness of the introduction of performance measurement systems in public sector organizations thus depends both on contractibility and on how the system is being used by managers. These findings have important implications, both for practice and for public policy.

Keywords: Performance measurement systems, Performance contracting, Public sector, New Public Management, Contractibility

JEL Classification: M4

Suggested Citation

Spekle, Roland F. and Verbeeten, Frank H.M., The Use of Performance Measurement Systems in the Public Sector: Effects on Performance (June 23, 2013). Management Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2283864

Roland F. Spekle (Contact Author)

Nyenrode Business University ( email )

Straatweg 25
P.O. Box 130
Breukelen, 3620 AC
Netherlands

Frank H.M. Verbeeten

University of Amsterdam - Faculty of Economics and Business, Amsterdam Business School ( email )

Plantage Muidergracht 12
Amsterdam, 1018TV
Netherlands
(+31)0205257391 (Phone)

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