Performance Management in The Public Sector

8 Performance Management
in the Public Sector

Learning Outcomes
 Describe the concept of performance management in

the public sector
 Relate the key performance indicators to performance
measurement, reporting and evaluation in the public
sector
 Explain the key performance indicator concepts and the
related roles and responsibilities in the public sector
 Discuss the importance of performance monitoring in
the public sector
 Appreciate the issues and challenges in implementing
performance management in the public sector
Public Sector Accounting Governance and Accountability in the Malaysian Context All Rights Reserved
© Oxford Fajar Sdn. Bhd. (008974-T), 2019 8–2
Introduction
 Performance management has become increasingly

important in the public sector, given that the government
has received enormous pressure to improve public
service delivery and in view that it has immersed itself in
commercial business activities.
 There are various ways that organizations pursue to
improve performance, i.e. establishing organizational
goals, monitoring the achievement of organizational
goals, and revamping inefficient organizational
processes and procedures.
Introduction (cont.)
 Performance measures are being actively developed in

Malaysia at both the federal and provincial government
levels.
 The interest on performance measurement in the public
sector can be observed through the introduction of
various types of performance measurement initiatives
e.g. key performance indicators (KPIs), balanced
scorecards and others to enhance its services and
promote transparent and accountable government.
The Concept of Performance
Measurement in the Public
Sector
 The public sector needs to be evaluated because
performance management can bring about
transparency and the most important element,
accountability.
 Performance measurement begins with determining the
organization’s mission, goals, objectives and activities.
 Performance measurement is also an incentive for
output and it can be divided into two categories:
(a) the quantitative e.g. budgets and cost reductions
(b) the qualitative measures e.g. public satisfaction and
physical development
Sector (cont.)
 In order to create an accurate, effective and efficient
performance measurement system in the public sector,
we need to have a good performance measurement
framework.
 Some of the most commonly used performance
measures include:
(a) Inputs (e.g. funds, personnel, equipment, and other
resources)
(b) Workload or activity levels (e.g. applications
processed, inspections carried out, and services
rendered)
Sector (cont.)
(c) Outputs (e.g. the number of children vaccinated,

miles of road built, tons of trash picked up, and students
graduated)
(d) Outcomes of products or services (e.g. illnesses
prevented, percentage of taxes collected, clean air
levels achieved, accident free workplaces attained, and
poverty alleviated).
(e) Productivity (e.g. cases investigated per detective,
applications processed per person, and emergency
calls handled per dispatcher)
Sector (cont.)
(f) Costs (e.g. average costs to build one kilometre of

highway, educate one child, and maintain public
roads)
(g) Customer satisfaction (e.g. number of complaints
received, results of surveys, and use of participative
processes)
(h) Service quality and timeliness (e.g. police response
times, ability to contact an agency by telephone,
compliance with transportation timetables, breakdown
rates, and service availability).
Sector (cont.)
The performance
management cycle in
the public sector
Sector (cont.)
 In the Malaysian context, the Public Service Department

implemented the new performance appraisal system
(NPAS) on 1 January 1992. The NPAS in the Malaysian
public service is a continuous process of evaluating
every employee’s performance, which begins in January
and ends in December every year. The system involves
several steps, which can be considered as a continuous
process.
Sector (cont.)
Key Performance Objectives
 Performance measurement may be able to assist public

sector organizations to perform the following
organizational functions:
1. To promote improvement of the organization—When
the organizations measure their performance by
conducting effective audit programmes, they will know
the milestones they have achieved and the targets they
have missed, and later be able to take corrective actions.
Sector (cont.)
2. To assist the legislature in ensuring that effective

control of resources is in place by complying with the law.
3. To celebrate and commemorate the
accomplishments of the organization. This also helps in
boosting motivation at the workplace.
4. To learn—Learning involves analysing the
information collected and translating the results from
performance measurement.
Sector (cont.)
5. To evaluate—By comparing its performance against

its evaluation criteria, the organization can see how
well it is performing and how it measures against
benchmarks and targets.
6. To budget—The budget is a tool that is used to
improve performance by examining variances, identifying
the cause of the variance, and taking corrective action to
reduce the variance.
7. To motivate—Setting targets and measuring
achievements can motivate the people in the
organization.
Sector (cont.)
Types of performance measurement
 The use of a combination financial and non-financial

measures, which focus on input, process, output and
outcome, is able to better reflect the long-term value
creation of the organization, particularly for the
intangible and intellectual assets, which generate future
growth or value for money service to the organization.
Sector (cont.)
(1) Performance measurement in the budgeting

process:
‒ to transform performance management system
from an input-based to an output-based system
(2) Micro-Accounting System (MAS):
‒ to fortify performance measurement and
introduce output costing (introduced by MAMPU)
(3) Productivity Improvement Initiative:
‒ to help identify performance indicators that would
be useful under MBS
Sector (cont.)
(4) Total Quality Management (TQM):

‒ emphasized the importance of results from
government operations and customer orientation in
public service delivery
‒ five basic concepts of implementing TQM:
(1) meeting customers’ requirement
(2) maintain through prevention
(3) standard of performance is zero defect
(4) cost of quality is non-conformance of standards,
(5) whole work is a process
Sector (cont.)
(5) Clients’ Charter:

‒ clients had an opportunity to know at what
level of quality a particular public service would be
rendered to them
‒ clients would be able to evaluate the performance
of a public agency and compare the standards of
performance with those of other comparable
agencies locally and abroad
(6) MS ISO 9001:
‒ to document the processes involved in producing
a particular service.
Sector (cont.)
(7) Benchmarking:
‒ sought to strengthen the public service culture of
performance by requiring agencies to emulate best
practices locally and abroad in the related areas of
service delivery
(8) KPIs:
‒ aimed at boosting the performance of the civil
service in line with the government’s effort to develop
the public service delivery system and as an
assurance that the elements of integrity and good
governance are being carried out
Sector (cont.)
(9) Star-based rating:

‒ the criteria for the rating comprise the core areas
in financial management i.e. budget planning and
execution, revenue collection, asset management,
procurement, payments and financial record keeping
(10) MAMPU’s five-star rating:
‒ assessed a ministry’s performance from poor,
warranting only one star, to excellent, deserving of five
stars
Sector (cont.)
‒ the criteria of assessment include strategic

planning and evaluation of execution, human resource
management, financial management,
policy and programme formulation, execution and
evaluation, and complaints management
(11) Scorecard for ministry heads:
‒ combines the individual performance of the
ministry head and that of his or her organization to
determine the ministry head’s performance
Sector (cont.)
(12) Government Transformation Programme (GTP):

‒ ministers who are responsible for the seven
national key result areas and all cabinet ministers are
given a performance scorecard with performance
targets
‒ the agency made responsible was PEMANDU
(13) Balanced scorecard:
‒ prompted users to identify an equal number of
measures in each of four perspectives: financial
perspective, customer perspective, internal,
innovation and learning perspective.
Sector (cont.)
KPIs
 KPIs have been used as the key to organizational
success to achieve the vision, mission, business
strategy, objectives and targets.
 This type of performance evaluation system is to ensure

that government service delivery systems will be
improved in line with its target to increase efficiency and
accountability, as well as enhancing productivity and
detecting possible areas for future improvements.
Sector (cont.)
Establishing key performance

indicators and conducting
performance measurement in
government agencies
Sector (cont.)
 Parmenter (2010) identifies the characteristics of KPIs
that cover most organization types, either public or
private sector. They are:
1 Non-financial measures
2 Measured frequently
3 Acted on by the CEO and senior management
team
4 Clearly indicate what action is required by staff
5 Measures that tie responsibility down to a team
6 Have a significant impact
7 Encourage appropriate action
Sector (cont.)
Value-for-Money Indicators
 An effective performance measurement system

provides numerous benefits to the public sector
organizations that will result in value-for-money for
public service delivery.
 Performance measurement seems to provide benefits in
a large area, depending on the objective and goals of
an organization in order to meet value-for-money
indicators.
Sector (cont.)
 Among the benefits of the performance measures that

are being used in various managerial activities are:
(1) Improve programmes and/or service quality
(2) Improve the ability to plan and measure performance
(3) Provide better short-term results
(4) Maintain customer loyalty
(5) Manage long-term predictions
Sector (cont.)
The Requirements of Performance Evaluation
 An evaluator and the human resource department are
responsible for ensuring that the performance indicators
are set according to the standards and that the process
of evaluating is as transparent as possible.
 Few guidelines that they need to observe includes:
(1) Evaluation is done on a timely basis
(2) The officer-in-charge in the evaluation process
should remain unbiased
(3) There must be no external factors influencing the
evaluation process.
Sector (cont.)
Roles and Responsibilities

 There are several key people involved in a performance
evaluation process of an organization:
(a) head of department
(b) a panel from the human resources development unit
(c) two evaluation secretariat officers.
 The head of department mobilizes resources under his
or her control which are human resource, finance,
equipment and technology to achieve organizational
objectives.
Sector (cont.)
 The responsibilities of the head of department, among

others, include:
(1) Determine the direction, goals and job targets of
each employee
(2) Ensure the establishment of a job system that works
efficiently in achieving the annual job target
(3) Collect commitments from each officer regardless of
rank through their participation.
Implementation of KPIs in the
Public Sector
Performance Measurement, Reporting and Evaluation

 There are six objectives of performance evaluation:
(1) To determine the placement of the employee and
career development that is related to the potential,
abilities and talents
(2) To determine the sustainability and eligibility for
promotions, acting posts, secondments and temporary
transfers
(3) To determine salary progression
Public Sector (cont.)
(4) To identify the employees for excellent service

awards, medals and honours as well as commendation
letters
(5) To identify and plan training needs
(6) To improve performance and motivation through
counselling.
 Through performance evaluation, the agency can

identify whether:
(1) the objectives of the programmes are realistic and
reasonable
(2) the programmes have been properly selected and
are capable of achieving particular public sector
objectives
(3) the programmes are properly planned in terms of
time and are provided with sufficient resources.
 The Public Service Department implemented the New

Performance Appraisal System, an ongoing process of
appraising every employee’s performance, which begins
in January and ends in December every year.
 The system involves few general steps, which can be

considered as a process, however periodic.
The performance appraisal

cycle in public sector
organizations
KPIs
 One of the most popular performance measurement
systems used by a large number of Malaysian public
sector organizations
 Introduced to measure efficiency and effectiveness of
work processes to provide and deliver quantity services
to customers, and to assess customer satisfaction
 Customer satisfaction will determine the rewards to the
employees and customer dissatisfaction provides the
employees with advice for improvement.
Example of
KPI
template
Example of weightage of the performance appraisal report score
Performance Monitoring
 Performance measurement can have many specific
applications:
(1) Problem identification:
It can identify undesirable conditions, such as wasted
resources, traffic accidents or vehicle failures, and help
determine their causes.
(2) Trend analysis:
It can help identify changes that are occurring.
(3) Peer comparisons:

It allows a particular organization or group to be
compared with peers (similar organizations or groups).
(4) Evaluating changes:
It can be used to track the results of specific
changes, including new policies and programmes, to
determine if they are successful, and for research
purposes.
(5) Target setting:

It allows managers to set specific targets to be
achieved.
(6) Incentives:
It can be used to establish rewards for managers and
employees.
Performance Improvement
 It is important for any government to have a good
foundation in planning to improve the public sector’s
performance.
 In Malaysia, the five-year development plan (of different
series) has been designed to comprehensively outline
the government’s development policies and strategies
in developing the nation through strategic development
planning.
Performance monitoring efforts in the Malaysian public service
 Among the policy and main initiatives that the

government prioritized in the Tenth Malaysia Plan ‒ New
Economic Model, Government Transformation
Programme (GTP), National Key Result Area (NKRA),
Economic Transformation Programme (ETP), National
Key Economic Area (NKEA) and National Blue Ocean
Strategy.
Issues and Challenges
Common problems
 The public sector’s provision of services is hugely
complicated by shared or sometimes conflicting
objectives, the demands of stakeholders and the
influence of politicians.
 The public sector faces numerous challenges when it
comes to performance management regardless whether
in terms of the attitude of employees towards their job or
the implementation of proper performance management
system in the organization.
Issues and Challenges (cont.)
 Some common problems faced by the public sector in

performance management:
(1) Lack of commitment from senior management
(2) Lack of knowledge and skill
(3) Resistance to change
(4) Ineffective performance evaluation practices ‘
(5) Keeping the systems active
(6) Linking performance management to job
descriptions
Public sector performance management milestones in Malaysia
Learning Outcomes
 Describe the concept of performance management in

the public sector
 Relate the key performance indicators to performance
measurement, reporting and evaluation in the public
sector
 Explain the key performance indicator concepts and the
related roles and responsibilities in the public sector
 Discuss the importance of performance monitoring in
the public sector
 Appreciate the issues and challenges in implementing
performance management in the public sector

Performance Management in The Public Sector

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Performance Management in The Public Sector

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8 Performance Management

in the Public Sector

 Describe the concept of performance management in

 Performance management has become increasingly

 Performance measures are being actively developed in

(c) Outputs (e.g. the number of children vaccinated,

(f) Costs (e.g. average costs to build one kilometre of

 In the Malaysian context, the Public Service Department

Key Performance Objectives

 Performance measurement may be able to assist public

2. To assist the legislature in ensuring that effective

5. To evaluate—By comparing its performance against

Types of performance measurement

 The use of a combination financial and non-financial

(1) Performance measurement in the budgeting

(4) Total Quality Management (TQM):

(5) Clients’ Charter:

(9) Star-based rating:

‒ the criteria of assessment include strategic

(12) Government Transformation Programme (GTP):

 This type of performance evaluation system is to ensure

Establishing key performance

 An effective performance measurement system

 Among the benefits of the performance measures that

Roles and Responsibilities

 The responsibilities of the head of department, among

Performance Measurement, Reporting and Evaluation

(4) To identify the employees for excellent service

 Through performance evaluation, the agency can

 The Public Service Department implemented the New

 The system involves few general steps, which can be

The performance appraisal

Example of weightage of the performance appraisal report score

(3) Peer comparisons:

(5) Target setting:

Performance monitoring efforts in the Malaysian public service

 Among the policy and main initiatives that the

 Some common problems faced by the public sector in

Public sector performance management milestones in Malaysia

 Describe the concept of performance management in

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