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Improving public sector performance is a critical means to improving the quality of services provided (McKinsey, 2011). According to Curristine (2005), enhancing public sector performance has taken on a new urgency as governments face mounting demands on public expenditure, calls for higher quality services and, in some countries, a public increasingly unwilling to pay higher taxes. To address these challenges, the public sector needs to enhance their performance by adopting new and improved approaches to budgeting. These approaches seek to move the focus of budgeting away from inputs towards results. To this end, organizations should be flexible in order to improve performance. They are then held accountable for results measured in the form of outputs and outcomes. Thus, performance supports better decision making by politicians and public organizations, which leads to improved efficiency, effectiveness and accountability, and ultimately, enhanced outcomes for the citizens and society at large. Curristine (2005) further stresses, that the desire to improve public sector performance is not new. Governments have always wanted results from their spending and regulation. What is new is that, increasingly, governments are facing overall spending constraints. With insufficient money to spend, more attention must be given to achieving better results from existing funds.

In the traditional public sector bureaucracy, performance is driven by ensuring compliance with set rules and regulations, controlling inputs, and adhering to the public sector ethos or principles.

This system generally worked well when governments had less complex and more standardised tasks to perform – and when complying with a set of rules was considered more important than efficiency or effectiveness. However, this system has been criticized, because the tendency is to become more focused on process than on results, and this provides weak incentives to use funds efficiently to achieve objectives (Curristine, 2005).

Improving performance in the public sector can relieve the financial pressure of shrinking budgets, while serving communities and citizens. McKinsey (2011) asserts that the public sector can deliver improvements on par with those achieved by the private sector, by:

i. Setting clear, long range aspirations for performance;

ii. Intensifying efforts to measure public sector performance;

iii. Putting performance data at the heart of decisions about making policy and delivering public services;

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iv. Holding regular, collaborative decisions on performance with those accountable for delivering progress and

v. Establishing comprehensive, sustained performance improvement programs that are led by deeply engaged public leaders- both elected officials and professionals.

Meeting these performance imperatives is not always easy. Delivering change on this scale is inevitably complex and particularly so in government, where the concerns of many stakeholders must be addressed. These difficulties explain why there have been too many failed or abandoned projects. Comparing different public sector departments in the same country, similar government activities or operations in different countries can provide the insights needed to shape performance improvement efforts. It is also pertinent to explain the underlying causes of differentiated performance. Public sector leaders need to understand the relative importance of each causal factor or performance driver to decide where and how to intervene to improve performance and prioritize scarce resources (McKinsey, 2011).

McKinsey (2011) also emphasizes the critical importance of taking an integrated approach to making policy and delivering public services. Policies developed without considering execution can fail to account for the resources required and how they must reflect citizen needs. At the same time, excellence in the delivery of government services can be just as important to performance measurement. To begin planning a scheme, it is critically important to separate the effects of various interrelated drivers of performance to isolate the ones that can be addressed most effectively.

It is imperative to note, that in the view of Curristine (2005), the strongest trend in performance currently, is the introduction of performance-oriented budgeting and performance management.

Broadly, performance management covers performance information, evaluation, performance monitoring, assessment and performance reporting. These can also be regarded as mechanisms used to assess the efficiency and effectiveness of public programmes and agencies.

According to Profiroiu (2001), assessing public organizational performance is difficult, caused by the difficulties that exist in the definition of performance: the first difficulty appears from the

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meaning of the concept of performance; the second appears from the way the performances are obtained, and the third from evaluating the performance. Figure 2.2 helps explains Profiroiu‘s view of performance. Measuring public sector performance, in the conception of the author, implies taking into consideration the distinction between: the means used (inputs), the process (throughput), the product (output) and the effect achieved (outcome). Performance assessment can be achieved through some measurement categories, namely:

a) Measuring the resource economy, which can be determined by comparing the price of the inputs with the designated value.

b) Measuring the costs, which involves measuring in monetary expression the resource consumption in order to provide a particular service.

c) Measuring the efficiency, which takes into account the obtained result in relation to the resources used, and a project is effective if the maximum results are achieved with a given level of resources, or if it uses the minimum resources for a certain level of the result.

d) Measuring the effectiveness, which is quantified by the ratio of the actual result to its expected level. The process of measuring the effectiveness faces difficulties concerning the assessment and the quantification of the results, which often have non-physical form, and cannot be directly measurable. The results of the public projects can have both economic and social nature.

e) Measuring the quality of services, which is designed to follow the degree to which the public product/service satisfies the requirements of the citizens. In this sense, the quality includes the effectiveness of a project. The deficiency of this method consists in the fact that the quality is a vague concept and far too complex that is not sufficiently reflected by indicators. The concept of quality encompasses not only the quality of the service offered, but also the quality of the process and the quality of the system.

f) Measuring the financial performance g) Measuring the overall performance

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Effectiveness Efficiency

Budgeting

Figure 2.2. The triangle of performance (Profiroiu, 2001)