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					Measuring Progress and Efficiency
in Public Administration
(Government at a Glance)

Oscar Huerta-Melchor
OECD - Public Governance and Territorial
Development Directorate (GOV)



Tukums, Latvia, 28 August 2008
                 Presentation outline


1. Describing Government at a Glance (GaaG)

2. Measuring Efficiency in the Public Sector

3. Building an HRM Indicator – delegation of authority




                                               2
1. Describing Government at a Glance (GaaG)

The OECD GaaG project aims to provide comparative data in
order to:

a) enable countries to better understand their own practices;

b) benchmark their own achievements through international
   comparisons;

c) learn from the experiences of other countries facing similar
   challenges.


                                                   3
                              …. and in the longer term


 Contribute to OECD-wide learning about public sector
  efficiency and institutional effectiveness.

 Explore possible causes of performance differences
  among governments.

 Begin to identify the impact of public sector reforms.




                                                  4
       GaaG will contain data on:


Antecedents     Revenue        Inputs       Process      Outputs        Outcomes



What is the   How much       How much      What does     What are       What is the
context in    money does     and what      the public    the goods      resulting
which         the public     kind of       sector do     and services   impact on
government    sector         resources     and how       which the      the
operates?     collect?       does the      does it do    public         country?
                             public        it?           sector
                             sector use?                 produces?



        Framework for understanding and measuring government’s activities

                                                                 5
a) Antecedents
 The political institutions and administrative structures provide the context
 that dictates public sector efficiency and effectiveness.

b) Revenue data
 It reflects the redistributive power of government and the degree of
 ‘excludability’.
c) Input data
  - Expenditures:            Expenditure structure

  - Employment data:         Labour as input for the production of public
                             goods and services.
  - Compensation costs:      The costs of public employment in order to
                             gain proper understanding of production costs.
  - Production costs:        Composition of employees, direct production
                             cost, indirect production cost. 6
d) Data on processes / institutional arrangements
  - Budget practices:    An annual budget law conditions             the
                         implementation of political decisions.

  - Performance          Governments are under pressure to improve
   measurement:          efficiency and effectiveness while controlling
                         public expenditure.

  - HRM practices:       Efficiency in the management of human
                         resources largely conditions the effectiveness
                         of governmental policies.
  - Regulatory quality   It underpins government’s ability to ensure
    management:          that regulations are efficient, effective and of
                         good quality.



                                                        7
  - Integrity framework:     Integrity is critical for achieving good
                             governance. However, existing indicators are
                             mainly based on perceptions and do little to
                             track changes over time.

  - e-Government:            Public sector transformation and e-
                             government are increasingly seen as closely
                             linked policy areas.
e) Output data
  Outputs and outcomes of public administration are concerned with the
  machinery of government. Defining outputs for measurement is a complex
  matter as what is an output for one sector is an input for other one.
  Therefore it is necessary to ask the question: outputs for whom?

f) Outcome data
  Executive governance indicators: trust in government, citizens satisfaction,
  equity and fiscal/economic stability.
                                                            8
The outcome at one level is an input at a higher level




                                                   9
Outcome as the starting point




                                10
2. Measuring Efficiency in the Public Sector

a) Why measure government?
   The size and economic significance of the public sector make it a
    major contributor to growth and social welfare.
   The government is a major economic actor in modern society. It
    provides goods and services in kind and it redistributes income
    through taxation and transfers.
   The government also provides non-economic and regulatory services
    (less tangible outcomes).
   The way of measuring the output of government strongly affects the
    growth performance of the national economy.


                                                       11
b) What are productivity and efficiency?
   Productivity is the ratio of a volume measure of output to a volume
    measure of input (OECD).
   Efficiency has two dimensions:

          Technical (or operational) efficiency.
          Allocative efficiency.


  Technical            Allocative             Economic (or cost)
  efficiency           efficiency             efficiency


   Two key objectives of efficiency measurement in the public sector:
     1) To trace technical inefficiencies
     2) To identify inefficiencies in the mix of production factors.
                                                            12
c) How to measure them?
   Measuring productivity and efficiency requires quantitative
    information on inputs (costs) and outputs (volume) of public service
    provision.
     BUT
   Public services are complex activities and therefore defining the
    relevant input and output variables for efficiency or productivity
    analysis is not straightforward.
  Output measurement – some challenges
   “Activities where non-market producers dominate pose specific problems
    of productivity measurement, due to the difficulty or impossibility of
    observing and/or defining market prices or output” (OECD).

   The input method is based on the assumption that output equals inputs
    for non-market services, then productivity is considered constant over
    time and across countries.
                                                         13
 It is necessary to carry out quality adjustments.
 Outputs can be measured at various levels: – Micro level
                                             – Intermediate level
                                             – Macro level
  BUT

   – Only final outputs should be counted since intermediate outputs
     may lead to double counting .
   – Aggregation requires weight .
 The output mix of many public sector organisations includes intangibles.
 The challenge of measuring outputs for collective services since it is
  difficult to define the output.
 The creation of incentives to ‘game’ or cheat.


                                                         14
Input measurement

 Efficiency analysis requires cost accounting.
 For costs to be imputed to outputs it is necessary to separate costs and
  outputs.
 Input information is not always available in monetary terms.

Difficulties in measuring efficiency

 Weak data.
 Poor-quality measures of output with perception-based quality
  indicators
 More importantly, the definition of the output and the methodology to
  measure it.


                                                           15
The impact of institutional arrangements on efficiency

 Understanding institutional arrangements is essential to understand
  efficiency of public sector production processes.
 Evidence on the impact of institutional drivers on efficiency in the public
  sector is rather limited.
  However:
    Efficiency gains may be obtained by increasing the scale of
     operations.
    Efficiency may increase via functional or political decentralisation to
     sub-national governments.
    Human Resource Management practices largely influence efficiency.

 Findings are inconclusive on the impact of ownership, competition and
  agencification over efficiency.

                                                             16
d) Exemplifying institutional drivers of efficiency – workforce
   issues
 a.   Workforce size
      Are larger organisations more efficient than smaller ones?

 b. Workforce composition
      What is the impact of workforce diversity and representation on efficiency?

 c.   Extent and nature of unionisation composition
      What is the impact of unions on public sector efficiency?

 d. Attractiveness of the public sector
      How to recruit and retain highly skilled staff?


                                                                  17
3. Building an HRM Indicator – delegation of
   authority
a) Why delegate?
 Good management is essential for improving performance and efficiency
  and improving services to citizens.
 Hence, OECD governments have enable and empowered public managers
  to adapt their HR systems to the business needs of their organisations.
 Delegation of authority to managers makes public organisations attractive
  employers.
 The speed and the extent of the reforms vary across countries due to
  differences in political, cultural and historical context.



                                                          18
b) What can be delegated?
1.   Delegation of manpower planning.
2.   Delegation of recruitment functions.
3.   Delegation of staff training and development.
4.   Careers systems and planning.
5.   Organisations have to be able to motivate their staff.
6.   Working arrangements.
7.   Retirement benefits.

         A good indicator of freedom to manage is the degree to which
                  departments control the personnel budget.



                                                              19
c) OECD criteria for building composite indicators

a) A clear theoretical framework.
b) Indicators must be selected on the basis of their quality and
   relevance.
c) Explain and justify the selection of weights and aggregation
   methods.
d) Select a method for handling missing values.
e) Normalise indicators to render them comparable.
f) Explicit assessment on the robustness of the composite indicator.
g) Presentation should clarify not mislead.
h) The composite indicator should be easily replicated.
                                                       20
   d) Delegation composite – the process

• Scoring and selection of each variables done within an expert group
• Variables aggregated and weighted according to an underlying
  theoretical framework (Alesina & all.)
• Implementation of statistical checkings:
   1) Questions not statistically relevant were removed for building the
      composite (i.e. Factor analysis)
   2) Good correlation among the set of variables (i.e. Cronbach alpha)
   3) Index robustness (i.e. Sensitivity analysis)
• The Delegation Index sticks to the steps identified in the OECD
  Handbook



                                                               21
e) The variables used for the HRM composite on delegation

Existence of a central HRM body (question 20)
Delegation of establishment (question 21)
Delegation of compensation levels (question 24)
Delegation of position classification, recruitment and dismissals (question 27)
Delegation of conditions of employment (question 30)
The arrangements for delegation (question 35)
Impact of delegation for pay/terms and conditions of employment across
government organisations.




                                                                22
f) Example of scoring




 Q. 20 Is there a central agency/department in charge of human resources
 at central/national/federal government?

 •Yes: 0.000
 •No. 1.000
 •Not responsible, but a central agency/department aims to coordinate
  the HR policies across departments: 0.5




                                                          23
         Q. 21 Delegation of establishment

                                  Central HRM
                                 body but with
                                some latitude for
                                                                                          Other variable,
                                   ministries/
   Primarily      Central HRM                       Ministries/depar                     depends largely
                                 departments/                          Unit/team level
 determined by       body.                          tments/agencies                      on departmental
                                   agencies in
                                                                                            functions
                                  applying the
                                     general
                                    principles
Numbers and
types of posts
within             0.250           0.500               0.750              1.000             0.625
organisations
Allocation of
budget
envelope
between payroll    0.250           0.500               0.750              1.000             0.625
and other
expenses

                                                                                  24
                                                                Delegation in the public service in OECD countries
      +       1.0
High
             0.9

             0.8

              0.7

             0.6

              0.5

             0.4

              0.3

              0.2

              0.1


Low          0.0

      -
                                           Australia




                                                                                                           Korea

                                                                                                                   Spain




                                                                                                                                                                                                                                                      Japan




                                                                                                                                                                                                                                                                                                               Portugal



                                                                                                                                                                                                                                                                                                                                  France
                    Sweden




                                                                                                                                                                             Norway




                                                                                                                                                                                                                                            Austria




                                                                                                                                                                                                                                                                       Ireland
                                                                                                                           Iceland




                                                                                                                                                                    Poland



                                                                                                                                                                                      Belgium




                                                                                                                                                                                                                        Germany




                                                                                                                                                                                                                                                                                                                          Italy
                                                       Canada




                                                                                                                                     Switzerland




                                                                                                                                                                                                Denmark




                                                                                                                                                                                                                                                                                                   Luxemburg
                                                                Finland




                                                                                                                                                                                                                                                              Mexico
                                                                                           United States




                                                                                                                                                                                                          Netherlands



                                                                                                                                                                                                                                  Hungary




                                                                                                                                                                                                                                                                                                                                           Turkey
                             New Zealand




                                                                          United Kingdom




                                                                                                                                                   Czech Republic




                                                                                                                                                                                                                                                                                 Slovak Republic
                                                       Composite Index                                                                                                                     Non weighted average OECD

      Source: OECD – 2006 HRM Survey Questions 20, 21, 24, 27, 30, 35, 36
      Notes:
      - Index comprised between 0 (no delegation) and 1 (high level of delegation)
      - Cronbach alpha : 0.876 (computed with SPSS). A Cronbach 's alpha above 0.6 indicates a high degree of correlation
      among a set of variables.
      - Data missing for Greece                                                                  25
    g) Pros and cons of composite indicators
             Pros                                     Cons
 Can summarise complex, multi-       May send misleading policy
  dimensional realities to support     messages if poorly constructed
  decision-making.                     or misinterpreted.
 Are easier to interpret than        May invite simplistic policy
  many separate indicators.            conclusions.
 Can assess progress of countries    May be misused.
  over time.                          The selection of indicators and
 Condense information and thus        weights could be subject of
  make possible to include more        political dispute.
  information.                        May disguise serious failings in
 Place issues of country
                                       some dimensions.
  performance and progress at
  the centre of the policy arena.     May lead to inappropriate
                                       policies if dimensions of
 Help to construct narratives.
                                       performance that are difficult to
 Enable users to compare              measure are ignored.
  complex dimensions effectively.
                                                        26
Further reading:
•   OECD (2007), “Towards Better Measurement of Government”,
    OECD Working Papers on Public Governance, 2007/1, OECD
    Publishing.
    doi: 10.1787/301575636734
•   Lonti, Z. and M. Woods (2008), “Towards Government at a Glance:
    Identification of Core Data and Issues related to Public Sector
    Efficiency”, OECD Working Papers on Public Governance, No.7
    OECD Publishing.
    doi: 10.1787/245570167540

•   OECD (2008), “Handbook on constructing Composite Indicators:
    methodology and user guide”, OECD JRC European Commission.
    OECD Statistics Working Paper.

•   European Commission (2005), “Input to handbook of good
    practices for composite indicator’s development”, Knowledge
    Economic Indicators; Workpackage 5 .
                                                    27
OECD GOV Technical Papers:
•   Technical Paper 1: ‘How and why should government activity be
    measured in ‘Government at a Glance’.
•   Technical Paper 2: ‘Issues in output measurement for ‘Government at a
    Glance’.

•   Technical Paper 3: ‘Issues in Outcome Measurement for ‘Government at
    a Glance’.

•   Technical Paper 4: Institutional Drivers of Efficiency in the Public Sector’.



         Information available on line: www.oecd.org


                                                               28
                   Oscar Huerta-Melchor
                        Policy Analyst
      OECD GOV Budgeting and Public Expenditures Division
               oscar.huertamelchor@oecd.org



For further information on the OECD Government at a Glance project contact:
                             Zsuzsanna Lonti
                             Project Manager
                        zsuzsanna.lonti@oecd.org
                             Laurent Nahmias
                                Statistician
                        laurent.nahmias@oecd.org



                                                             29

				
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