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LEARNING OUTCOMES
At the end of this chapter, students should be able to:

LECTURE 6 • Define performance management

• Identify and describe the concept, purposes, characteristics and

PERFORMANCE types of performance management

• Describe the use of key performance indicators (KPIs) as

MANAGEMENT IN PUBLIC performance measurement tools

• Explain performance measurement and the concept of economy,

SECTOR
efficiency and effectiveness

UKAF3063 PUBLIC SECTOR ACCOUNTING

TOPIC 2: MANAGEMENT ACCOUNTING ISSUES
2

PERFORMANCE MANAGEMENT
Van Dooren, Bouckaert &
Halligan, 2010
Type of management that incorporates and uses performance
information for decision-making
CONCEPT OF • Performance management drives performance improvement and

PERFORMANCE should be designed to reflect their own priorities and drivers

• Any system should incorporate a feedback loop so that

MEASUREMENT performance measures monitor the implementation of strategy and

crucially, feed back into strategy formulation, so organisation would
have capabilities to deliver strategic plans and connect up goals
LECTURE 6
with outcome
PERFORMANCE MANAGEMENT IN PUBLIC
SECTOR
UKAF3063 PUBLIC SECTOR ACCOUNTING CONCEPT OF PERFORMANCE MANAGEMENT 4

PERFORMANCE MANAGEMENT PERFORMANCE MANAGEMENT

• The process by which organisations set strategy and devise the
governance, values processes and controls to direct people and
money to deliver their strategic objectives in a cost-effective way
with due regard to risks and opportunities
• It is more than a process, it must be the bedrock, along with
regularity and propriety, of good stewardship over public funds
• Performance management is action, based on performance
measures and reporting, which results in improvements in behavior,
motivation and processes and promotes innovation
• Performance measurement is quantifying, either quantitatively or
qualitatively, the input output of level of activity of an event or
process
• A successful performance management system must consider the
following key features:
– Alignment of the performance management system, and the
existing system and strategies of the organisation
– Leadership commitment
– A culture in which it is seen as a way of improving and
identifying good performance and not a burden that is used to
chastise poor performers
– Stakeholder involvement
– Continuous monitoring
– Adequate infrastructure
Owen, Mundy Guild and Guild, 2001 and Fryer, Antony and Ogden, 2009

CONCEPT OF PERFORMANCE MANAGEMENT 5 CONCEPT OF PERFORMANCE MANAGEMENT 6

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INITIATIVES IMPLEMENTED BY THE

PERFORMANCE MANAGEMENT GOVERNMENT
• KPMG, 2010 reinstates that successful performance management
requires the following elements:
– Focus on performance management as opposed to performance PPBS MAS MBS TQM
measurement
– Recognition of the characteristics of the public sector New
– A culture of performance management through continuous, Remuneration Clients’ Charter ISO Benchmarking
Scheme
bottom-up improvement
– Effective performance management frameworks with sufficient
authority at leadership level Star Rating
KPIs NKRAs OBB
System

CONCEPT OF PERFORMANCE MANAGEMENT 7 CONCEPT OF PERFORMANCE MANAGEMENT 8

PERFORMANCE MANAGEMENT AND

INTERNAL CONTROL
• Increasing demand for better transparency and services has made
performance measurement a vital component in government
planning and management
• It provides information on the efficiency and effectiveness of
programmes designed by the government
• Essence for continuous improvements so that the public would
have better services at greater levels of efficiency. PERFORMANCE
• The public sector needs to constantly seek ways so processes can
be improved before their services are delivered to the public at
large.
MEASUREMENT
LECTURE 6
PERFORMANCE MANAGEMENT IN PUBLIC
SECTOR
CONCEPT OF PERFORMANCE MANAGEMENT 9 UKAF3063 PUBLIC SECTOR ACCOUNTING

PERFORMANCE MEASUREMENT PERFORMANCE MEASUREMENT

• The process of quantifying the efficiency and effectiveness of action
• Boekhorst, 1995 - Begins with determining what the organisation
mission, goals, objectives and activities are
• Measure organisation activities to make sure that the activities
were aligned and reachable with the goals
• Consists three interrelated elements:
– Individual measures that quantify the efficiency and effectiveness
of actions
– A set of measures that combine to assess the performance of
an organisation as a whole
– A supporting that enables data to be acquired, collated, sorted
and analysed, interpreted and disseminated
Fryer et al, 2009; Neely, Mills, Gregory & Platts, 1995

PERFORMANCE MEASUREMENT 11 PERFORMANCE MEASUREMENT 12

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FUNCTIONS OF PERFORMANCE TYPES OF PERFORMANCE

MEASUREMENT MEASUREMENT
• These measures which focus on input, process, output and
Strategy
formulation and Communication Provide feedback outcome, is able to better reflect the long-term value creation of
implementation the organisation
• Non-financial measures:
– Key Performance Index (KPIs)
Encourage
Benchmark and – Critical Success Factors (CSF)
Evaluation improvement and
Motivation
learning – Activity-Based Costing (ABS)
– Benchmarking
– Balance Scorecard
Reward and
celebration

PERFORMANCE MEASUREMENT 13 PERFORMANCE MEASUREMENT 14

BARRIERS IN IMPLEMENTING
FACTORS OF A SUCCESSFUL
PERFORMANCE MEASUREMENT SYSTEM PERFORMANCE MEASUREMENT
Commitment to a
SYSTEM
performance Commitment from Realistic
measurement top management expectations Strategy is not
culture Strategy is not
Vision and strategy linked to
linked to resource
not actionable department, team
allocation
Implementation and individual goals
Adequate and Initiatives and plans
action plan with
appropriate are clearly
milestone should be
resources communicated
clearly defined
Feedback is tactical
and not strategic
Continuous
Effective
improvement should
communication
be strived

PERFORMANCE MEASUREMENT 15 PERFORMANCE MEASUREMENT 16

KEY PERFORMANCE INDICATOR

• Represents a general indicator of performance that focuses
KEY on critical aspects of outputs or outcome and reflects the
critical success factors of an organisation

PERFORMANCE • A simple and an effective measurement system that helps org.

to explain and manage the services’ progress for customers

INDICATOR THE aligned with the vision and mission of the organisation

CONCEPT OF 3ES
LECTURE 6
PERFORMANCE MANAGEMENT IN PUBLIC
SECTOR
UKAF3063 PUBLIC SECTOR ACCOUNTING KEY PERFORMANCE INDICATOR 18

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CHARACTERISTICS OF A GOOD GOVERNMENT TRANSFORMATION

KPI: PROGRAMME
• KPIs in Malaysia is based on the measurement of performance of
• Provides nonfinancial measures
the Government Transformation Programme (GTP)
• Measurement is done frequently
• Objectives of GTP:
• Clearly indicates the actions and expectation required from staff
– To improve the efficiency with which the government delivers
• Has a significant impact services and the accountability of outcomes relevant to the
• Encourage appropriate action Rakyat
• Has leadership commitment and is acted on by the leader – To encourage the development of Malaysia into an advanced,
untied and just society with high-standards of living for all

KEY PERFORMANCE INDICATOR 19 KEY PERFORMANCE INDICATOR 20

NATIONAL KEY RESULTS AREAS CONCEPT OF 3E S

• Under GTP, six key priority areas have been identified, and
challenges within each area have been divided into short-term Economy Efficiency Effectiveness
priorities and long-term issues, known as National Key Results
Areas (NKRAs) and each NKRA is headed by a ministry • Concerned with • Measure by • Concerned with
inputs comparing output and
• The success of GTP is measured based on the performance both output with input outcome
• Using minimum
NKRAs and Ministerial Key Results Areas (MKRAs) using input to achieve • The more output • Refers to the
quantifiable National Key Performance Indicators (NKPIs) maximum for input, the success or failure
outputs more efficient in achieving
• To be prudent in the organisation organisation’s
spending will be objective
• Looking at the
process, avoid
wastage

KEY PERFORMANCE INDICATOR 21 CONCEPT OF 3ES 22

END OF LECTURE
THANK YOU ☺
LECTURE 6
PERFORMANCE MANAGEMENT IN PUBLIC
SECTOR
UKAF3063 PUBLIC SECTOR ACCOUNTING