Performance measurementpresentation

Performance
Measurement In Public
Sector: Concept, Tools
And Challengers
PREPARED FOR:
PROF. MADYA DR. ENGKU
ISMAIL B ENGKU ALI
Group 3D
NAME MATRIC NO.
SITI AISHAH BINTI ABD HAMID 221560
MOHAMAD ARIFFUDIN BIN ZULKEFLEE 221727
MOHD SHAHRULNIZAM BIN MOHAMAD 221777
SITI HADIJAH BINTI HOSEN 222110
FATIN SYAHIRA BINTI HARIS 223992
SITI RADIAH BINTI RAZALI 224184

INTRODUCTION
Public sector organization adopted performance
measurement to show the transparency and
accountability of the government and to enhance their
services.
Recent circular by the Chief Secretary, government of
Malaysia had increase their effort in adopting outcome-
based performance monitoring and evaluation method
on the governments’ both projects and programs.
Prime Minister, Datuk Seri Mohd Najib in his Cabinet
Appointment speech, he press on the Performance
Now! as the new administration’s tag line.
The Prime Minister is determine to roll out KPIs to all
ministers and has resulted in the exist of a new unit
called Unity and Performance Unit .

CONCEPT
Neely et al. (1995) defined performance measurement as the process of quantifying the efficiency and
effectiveness of action.
Radnor and Barnes (2007) described performance measurement as quantifying, either
quantitatively or qualitatively, the input, output or level of activity of an event or process. It is
the beginning for improving operational performance.
Lebas(1995), define performance measurement as including measures based on key success
factors, measures for detection of deviations, measures to track past achievement, measures to
describe the status potential, measures of output and measures of input.
According to Fryer et al(2009), four aspects of performance measurement are deciding what to
measure, how to measure it, interpreting the data and communicating the results.
Jean-Francois Henri (2004)defined performance measurement as management and control systems that
produce information to be shared with internal and external users.

CONCEPT cont..
, Nanni et al
(1992)
• It encompasses all aspects of the business management cycle, this model
constitutes a process for developing and deploying performance direction.
Lemieux-Charles
et al (2003)
• It is a process of monitoring that shows where change is required and
which will in turn produce the desired behavior that will produce improved
performance.
Bruijin (2002)
• “where public organization formulates, envisages performance and
indicates how this performance can be measured by defining the
performance indicator”.

CONCEPT cont..
Bruijin (2002) defined performance measurement in public sector as “where public
organization formulates, envisages performance and indicates how this
performance can be measured by defining the performance indicator”.
According to Cuguero’-Escofet & Rosanas (2013), performance measurement
system is designed to achieve the greatest possible goal congruence such as
employee pursue personel goals that are parallel to organizational goal.
The performance measurement models evolved from mainly based on financial
measures to a holistic view based on multiple nonfinancial measures.
Johnson and Kaplan(1987) said it is mainly underpinned by a financial perspective
In a holistic view, performance measurement plays a key role in the development of
strategic plans and evaluating the achievement of organizational objectives, Ittner
and Larcker(1998a) as well as a signaling and learning device, Simon(1990).

Performance measurementpresentation

Financial Performance
• Financial performance focuses on financial matters such as total budget, total
income or total expenditure and normally disclosed through the financial
statement.
• The organization uses the financial measure techniques which include profit,
return on investment (ROI) and return on asset (ROA) but lately there have
been a lot changes in organization environment and behavior involving
internal and external performance measures.

Budgeting
• Budget for public sector contains two elements which is the estimate revenue
and estimated expenditure.
• Budgeting in public sector is a process of identifying objectives, planning of
programmes and projects to attain the objectives, identifying sources of
funds, the allocation of funds and the review of the programme results.

Financial Reporting
• Through a financial reporting, vital information about the value and the
financial strength of the company, its ability to be a going concern and its
ability to generate profit can be accessed easily.
• Even though public sector organizations are not measured by its bottom line
or profit, there are many copies of essential information that relates to the
performance measurement in the financial reporting of the public sector

NON-FINANCIAL PERFORMANCE
• Non-financial performance as technique to deliver performance of
organization to the public.
• Evolution of the organization environment
• Example:
3Es
Key Performance Indicator (KPI),
Outcome-based Management (OBM)
Balance Scorecard (BSC)
Benchmarking
National Key Result Areas (NKRA)

3Es
• The 3Es refers to effectiveness, efficiency, and economy.
• In order to establish an appropriate accounting system for the purpose of
accounting public monies and assets, the government need to implement a
method to evaluate or measure the performance of its employees.
• In public sector, the effectiveness concept focuses on the outcome or
impact of program or activity to the public.

Key Performance Indicator (KPI)
• KPI are indicators used to report progress towards delivery on factors identified as critical to the
success of the organization’s goal and objectives
• A good performance indicator should be relevant, objective, quantifiable, reliable, not too
complicated and cost-effective.
• The KPI technique involves four steps:
 Identification of the key performance indicators and setting up the performance target
 Continuous measurement and evaluation of performance based on the KPI
 Continuous monitoring of the performance level
 Continuous improvement of the performance

Outcome-based Management (OBM)
• Outcomes are defined as the effects, impacts, results on or consequences for
the community/target clients of services delivered by agencies.
• Beside that, outcome indicate the state of society in areas where the
government is trying to bring about change.
• It also focuses on the planning stage, monitoring the program or activities
and evaluation on desired results of government program or activity and the
reminder of why the program is being delivered.

Balance Scorecard (BSC)
• The Balanced Scorecard is a tool that provides a method of linking organizational
strategies to activities and results.
• Consists of a Strategy Map and linked measures and indicators.
• A Strategy Map is depicting the organization from four distinct perspectives :-
Financial perspective
Customer perspective
Internal process perspective
Growth perspective

Benchmarking
• As an efficiency tools based on the principle of measuring the performance
of one organization against a standard, whether absolute or relative to other
organizations.
• Can be used to :-
Assess performance objectively
Expose areas where improvement needed
Test whether improvement programmes have been successful

National Key Result Areas (NKRA)
• Prime Minister Datuk Seri Najib Tun Razak had announced the key performance indicator‘s
six cores.
• The six NKRA decided by the Cabinet are:
o Reducing crime (Ministry of State)
o Combating corruption (legal division, department of prime minister)
o Enhancing educational achievement (ministry of education)
o Improve standard of living of low-income households (ministry of women, family and
community)
o Improving basic rural infrastructure (ministry of rural development and territory)
o Improving urban public transport (ministry of transport)

Challenges of
Performance
Measurement in Public
Sector

The performance measurement in the public sector is more
challenging compare with the private sector. In private sector the
important factor is profit maximization, it’s differ with the public
sector which is bring many objectives.
The need to raises for understanding the causal connections
between program outputs and the desired program outcomes.
There is also no clear link between the decisions given by the
government and the final efficiency and accessibility of
government system.

The lack of utility of existing performance measures to enhance
organizational effectiveness, and inability to compare measures
across different programs and organizational unit.
To communicating performance information both internally to
enhance the management of the organization and externally to
demonstrate the resources are being expended efficiently, within
the precepts of public policy.

The manipulation of the performance measure system,
challenges and difficulties in quantifying qualitative objectives.
Regarding to apply performance measurement which is
measuring the qualitative objective.
About measurement of cost. There are large proportion of costs
that are not naturally traced to output and outcomes, thereby
involving significant amounts of cost that easily wasted.

Relate to the controllability of government performance.
Accounting requires the measures to be systematically linked to
costs and capable of being audited in some sense, so focuses on
the measure to be included in the annual budget and in the
audited financial statements.
Comprehensiveness versus concision in reporting. It is to
determine a balance between the natural need to generate many
performance measures and the equally natural demand from
service recipients, politicians and the population at large to be
given a simple understanding of performance. Thus, partial
performance measures can produce serious misunderstanding of
the comprehensive performance of a government but the
importantly of those measures is to be understandable to non-
specialist.

Performance measurementpresentation

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Performance measurementpresentation