International Journal of Productivity and Performance Management

Australian public sector performance management: success or stagnation?

Lewis Hawke

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Lewis Hawke, (2012),"Australian public sector performance management: success or stagnation?",
International Journal of Productivity and Performance Management, Vol. 61 Iss 3 pp. 310 - 328
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Australian public sector

performance management:
success or stagnation?

310

Lewis Hawke

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University of Canberra, Canberra, Australia

Abstract
Purpose Australia has been a leader in public sector performance management for around three
decades yet there have been persistent weaknesses in the quality and use of performance information
since the system was established. This paper seeks to identify and explain the key factors affecting the
success of Australias public sector performance management system.
Design/methodology/approach The study distils six key influences on public sector
performance management from academic and practitioner literature. It examines the data available
from official documents, reviews and performance audits to identify and analyse the factors that have
shaped the Australian system.
Findings Australias public sector performance management arrangements have been defined by
strong external (political), structural and technical factors. These have been a very positive feature in
achieving a stable and sophisticated system. This paper suggests that more emphasis on management,
behavioural and cultural factors could be more beneficial than continuing to focus on purely technical
refinements for further reform.
Practical implications The results can contribute to refinement of policy and implementation in
Australia. The diagnostic framework can be used for further analysis of public sector performance
management in Australia or other countries.
Originality/value The study draws on existing literature and information on the quality and
impact of public sector performance management to develop a diagnostic framework and analyse
Australias experience. It identifies key attributes of Australias success and factors that may be
limiting further improvements.
Keywords Public sector organizations, Performance management, Australia
Paper type Research paper

International Journal of Productivity

and Performance Management
Vol. 61 No. 3, 2012
pp. 310-328
q Emerald Group Publishing Limited
1741-0401
DOI 10.1108/17410401211205669

Introduction
There have been attempts to develop measurement and assessment systems for public
sector performance for centuries. The systems of performance measurement have
become more sophisticated and widespread in the last three decades. However, despite
the long period of implementation and refinement, fundamental weaknesses persist in
the quality and use of performance information. In parallel with practical
developments, the body of literature seeking to document, explain and improve
public sector performance has also grown. Performance has been defined and
scrutinized in many different ways. This study focuses on the factors underlying
success in the implementation of performance management arrangements in the public
sector. It uses Australia as a case study in an attempt to test the significance of factors
identified as important in the academic and practitioner literature, and draws
conclusions on how those factors have shaped Australias performance management
together with their potential to affect future success.
Performance management in this study refers to the interrelated strategies and
activities to improve the performance of individuals, teams and organisations.

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Its purpose is to enhance the achievements of agency goals and outcomes for the
government (Management Advisory Committee, 2001, p. 14).
Bouckaert and Halligan (2008) developed a framework for classifying the different
types of performance regime applied by governments. They differentiated between
types largely on the basis of depth and span of application. They identified differences
in the depth of coverage from within an organization (micro), to across organisations
within a function or policy theme (meso), to across the whole of government (macro).
The span of application related to the range of practices to measure and incorporate
performance covering economy, efficiency, effectiveness and trust. The framework
established four distinct approaches to managing public sector performance from the
most basic, performance administration, to the most sophisticated, performance
governance. They included Australia as a performance management type of system,
albeit with some limitations. They assessed that the Australian system exhibited an
hierarchical performance measurement system with integrated, coherent,
comprehensive and consistent elements (Bouckaert and Halligan, 2008, Chapter 6).
Australia does not have the attributes of the more sophisticated performance
governance type because of limitations on the span of management at the meso and
macro levels. The Australian arrangements also demonstrate weaknesses in the
systemic application of performance information, particularly in terms of the
effectiveness and trust dimensions.
Performance management has been a formal part of the Australian public sector
since 1984 when the Government introduced the Financial Management Improvement
Program (FMIP), incorporating program management and budgeting (Parliament of
Australia, 1984). The framework has been refined and modified many times (Bouckaert
and Halligan, 2008), including at least two significant revisions in the last decade.
The Australian performance management framework consists of several prominent
features: budget planning, preparation and execution on the basis of outcomes and
explicit performance measures; considerable flexibility to reallocate resources within
each budgeted outcome; and devolution of responsibility to line ministers to define
their intended outcomes and performance measures, subject to minimal intervention
by central departments, Cabinet or the Parliament.
The Australian parliament regularly reviewed the implementation of the FMIP over
almost a decade after its introduction. A common observation throughout the life of the
program was the patchy and generally poor quality of performance information. This
criticism continued to be directed at subsequent performance management
arrangements, even after major changes were introduced as part of the accrual
budgeting framework in the late 1990s (Parliament of Australia, 1999, 2001, 2007;
ANAO, 2007).
The Australian Labor Party (ALP), the main Opposition party in Parliament until
late 2007, adopted a policy for public financial management reform called Operation
Sunlight (Tanner, 2005). The policy proposed changes to address perceived
inadequacies in the quality and relevance of budget information, particularly
regarding outcomes. The policy platform was implemented following the election of
the ALP to government in 2007. This was supplemented by further government action
in response to recommendations from an independent review by one of the major
critics of budget reporting in the parliament at the time (Murray, 2008). The Labor
government did not identify any specific results it expected to achieve from its changes
to performance management, however it stated that the new arrangements showed,

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a clear and continuing commitment to openness, transparency and good governance

(Tanner, 2008, p. 3).
The main changes introduced in regard to the outcomes and outputs framework
were to review all outcome statements against a set of basic presentational standards,
to replace outputs with programs and deliverables, to improve the quality of budget
reporting and to establish a clearer link between organizational performance and the
responsibilities of senior executives. Other changes were introduced in the last five
years to broaden the performance management framework, through the establishment
of a strategic review initiative at the Federal level, extension of performance estimates
to four years and development of a register of national minimum data sets for health,
education, skills and workforce development, housing, indigenous and disability
services (Ministerial Committee for Federal Financial Relations, 2011).
It may be too early to assess the full impact of recent changes to the performance
management regime, however, the early signs are not promising. The Australian
National Audit Office recently completed a performance audit of the quality of
performance information in portfolio budget statements. The report found that
weaknesses observed by the ANAO and others in earlier assessments remain
stubbornly persistent, particularly in relation to the lack of consistency and quality of
performance information (ANAO, 2011). The ANAO concluded that:
While the Outcomes and Programs Framework is in its third year, the findings of this audit
indicate that many entities continue to find it challenging to develop and implement KPIs; in
particular, effectiveness KPIs that provide quantitative and measurable information,
allowing for an informed and comprehensive assessment and reporting of achievements
against stated objectives (ANAO, 2011, p. 17).

In terms of Bouckaert and Halligan classification, the Australian performance

arrangements remain essentially within the performance management category,
despite the changes made since their assessment in 2008. There has been little evidence
of broader societal engagement in the system. The recent changes appear to refine and
expand the scope of performance management activities without increasing their
interconnectedness. While the Bouckaert and Halligan typology is not intended to be a
progression, Australia has not move closer to the performance governance type
despite the broadening of its span suggests a degree of stagnation. This raises the
question of whether the increased span of the system has the capacity to be
transformed into an effective performance governance system.
The remainder of this paper seeks to explain the current status of performance
management in Australia using a diagnostic framework for systematically examining
the factors that have influenced the system. The findings of the assessment are then
used as a basis for discussing the future direction of public sector performance
management in Australia. The analysis in this paper focuses on performance
management at the national level.
Theoretical framework
To understand the status of performance management in Australia it is necessary to go
beyond categorization of the framework to look at its impact. This paper considers
performance management in relation to the quality of performance measures and their
perceived usefulness to key stakeholders. These are considered to be measures of
success that are important in the praxis of performance, rather than simply the creation

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of systems with theoretical or political merit. Unfortunately there are few studies of the
quality and usefulness of performance information in Australia so it is necessary to
rely on more general published and unpublished reports and related information to
draw conclusions. This paper seeks to provide a catalyst for further research in this
area.
In reviewing the success of Australian public sector performance management, the
paper examines the achievements in terms of six factors that are considered to
encompass the main influences on success. They are: external, structural, managerial,
technical, cultural and behavioural factors. These elements have been chosen following
extensive review of the performance management literature to draw out the ones that
are identified most clearly with success across countries that have adopted some form
of public sector performance management, for example (OECD, 2007; Bouckaert and
Halligan, 2008; Arizti et al., 2010; Boyne et al., 2006; Forbes et al., 2006; Van Dooren and
Van de Walle, 2008). The analysis draws on various strands of theory including
institutional, management, behavioural, organizational, public administration and
communications.
External factors encompass all of the influences outside of the public sector
operations that can impinge on performance management. The most well reported of
the external influences in the performance literature is political factors (Pandey and
Moynihan, 2006), (De Lancer Julnes, 2008). This includes the influence of politicians in
power, as well as those who wish to exert political influence in opposition. It also
covers the impact of changes in political power. Other elements of this group are civil
society, economic effects, both domestic and international, and comparative
developments in other jurisdictions relating to performance management which may
influence the shape and character of the system: the copy-cat and the cookie-cutter
are common manifestations of this impact.
Structural factors relate to the legal, regulatory, institutional and organizational
structure within which performance management operates. At the system level, these
elements are specific to a country and apply to all public bodies of a single country or
jurisdiction. The significance of these influences on individual entities also varies but,
in considering the system as a whole, the agency level variations are less of an effect on
the overall result. Without going into detail, structural differences between public
sector management systems are readily identifiable, for example, when comparing
USA, Francophone, Westminster and former socialist republic systems (Wanna et al.,
2003, 2010).
Managerial factors include the role of government and agency managers in
implementing and using the framework. These influences encompass the effects of
leadership, change management, organizational alignment with policies,
administration and control. They intersect with structural, cultural and behavioural
factors in regard to the effects of hierarchical relationships where management
provides a means by which those factors are activated and applied (Kotter, 2007).
Technical factors are those emanating from the design of performance management
regimes, the capacity of public officials to implement the arrangements, and the
achievements in terms of measurement quality, maintenance of systems and reporting
procedures. These factors include also the influence of guidance and training of people
responsible for designing and collecting performance information and those receiving
and using the information. A clear majority of literature from the practitioners side is
devoted to technical aspects of performance management, for example, Wholey et al.

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(2004), Hatry (2007), Kamensky and Morales (2005), Hawthorn and McDavid (2006).
Technical factors set the rules or boundaries within which management, culture and
behaviour operate. The specific technical details can have a direct impact on the
behaviour and actions of management.
Cultural factors include ways of operating and values inherent in the system,
including institutional, operational and societal cultures. Culture affects the way in
which performance management is practiced and the extent to which it is internalized
and applied (Franke et al., 1991; De Bruijn, 2007; Moynihan, 2008). For example, Halls
work identified differences between high and low context cultures in the extent to
which detailed rules are needed as a basis for effective communication and action (Hall,
1976).
Behaviour is distinguished from culture in that it relates to how people respond to
the performance management system and to the results of performance information. A
crucial aspect of behaviour in performance management is how it affects what people
choose to measure and how they respond to the results. The most profound effects of
behaviour on the success of performance management are the uses of performance
budgets and targets which have strong, and often perverse, effects on what people do
to achieve or avoid the constraints placed on them through performance expectations
(Schick, 1990; Radin, 2006; Hood, 2006; Simon, 1997; Radnor, 2008). Behaviour is
strongly influenced by culture and management factors, and is also very responsive to
technical and institutional factors.
In addition to the influence of each individual factor on performance management,
the combined effects from two or more factors can alter or accentuate the effect of
others. Some of these interrelationships have already been mentioned, but there are
many other ways in which different elements can have reinforcing or countervailing
effects. While some of these are drawn out in the discussion which follows, a more
complete exposition is beyond the scope of this paper.
Methodology
The paper seeks to analyse Australias public sector performance management in
terms of the framework outlined above. It draws on previous research, published
reviews, performance audits and government policy statements during the last three
decades to identify and discuss how the various factors have contributed to the
development and quality of the Australian performance management system. The
paper focuses on the last decade because of the significant changes that have occurred
during that period. There have been few published studies in the period, which also
makes this papers emphasis on recent changes timely as a record of reform progress.
The case study approach to testing and refining theoretical propositions is a
well-used method, common in the performance management literature (Forbes et al.,
2006). As with many studies covered by the Forbes et al. review, this paper views
performance management as a dependent variable and seeks to explain the impact of
six explicit groups of independent variables on the results which have been achieved in
Australia. These groups of independent factors influencing public sector performance
management are: external; structural; technical; managerial; behavioural; and cultural,
as explained above.
The approach used in this paper has not been documented previously in the public
sector performance management literature. While many studies have looked at one or
more of the factors referred to in the theoretical framework, there are none that cover

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all six and the interrelationships between them in a comprehensive or systematic way.
This necessitates a degree of caution in the frameworks application. If a prima facie
case can be made to warrant further investigation, follow up quantitative and
qualitative analysis will be pursued. This paper has the dual function of shedding light
on the suitability of the theoretical framework for further research and providing an
updated assessment of Australias progress on the path to effective performance
management, or perhaps its evolution to performance governance (in terms of the
Bouckaert and Halligan framework).
Factors shaping public sector performance management in Australia
The nature and significance of factors shaping performance management in Australia
have changed considerably since the arrangements were established in 1984. In brief it
can be seen that the external factors of political change and the willingness of powerful
institutions within the public sector were dominant during the initial establishment
phase. The subsequent implementation and refinement phase of the 1980s and 1990s,
witnessed the growing importance of technical and structural factors. Managerial
factors increased in significance at that time. In the last decade technical factors have
continue to be important driver for reform while the significance of cultural and
behavioral factors has begun to emerge. The remainder of the paper looks in more
detail at the changes in the last decade, however reference is made to earlier
circumstances where they contribute to understanding and explaining recent
developments.
External factors
The performance management framework in Australia has enjoyed support from all
major political parties since 1984, building on review and analysis of public
administration in the preceding decade (Parliament of Australia, 1976, 1983). The
establishment of the regime required external political initiative from the ALP
government, which took office in 1983. The difficult economic circumstances around
the time of the election and implementation provided additional pressure to support
measures to improve the efficiency and cost-effectiveness of the public sector.
Each successive government since 1984 has sought to refine performance
management, but the basic existence of the system has not been seriously challenged
by changes in external circumstances. This has provided a strong on-going foundation
for success. Officials have not had a major cause to doubt the future of the framework
and so have operated on the expectation that they will be required to apply it
indefinitely. Politicians from both major parties have sought to promote a culture of
transparency and accountability for performance and results throughout the last three
decades. Their influence has resulted in frequent refinements and changes but without
altering the basic framework (OECD, 2007, Chapter 6).
An important deviation from the implementation path of performance
management was associated with the change of government in 2007 and the
subsequent influence of the global financial crisis. In 2007 the new ALP government
initiated a range of special razor gang reviews of public expenditure as part of its
election commitment to reduce unnecessary public expenditure. These reviews were
aimed at reducing inefficient expenditure and reorienting public activity to the
policies of the new government. Rather than drawing on performance information
developed over the preceding years, the reviews took an ad hoc approach, focusing on

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areas of high levels of expenditure or policies strongly aligned to the previous

governments policy agenda. Even so, the reviews did involve assessment of the
efficiency of policies and programs that were targeted for cuts and this was reflected
in the recommendations. Although the razor gang reviews were finalized before the
worst effects of the global financial crisis were apparent, the recommendations were
not fully implemented. The government decided that it needed to change strategy,
either due to the effects of the financial crisis, or closer examination of other potential
consequences of specific cuts in public expenditures, or a combination of factors. The
net result was a substantial increase in public expenditure to stimulate economic
activity and brighten consumer sentiment.
The reviews, their recommended expenditure cuts, and the alternate policies for
increases in expenditure owed little to the body of performance information and
analysis that had been developed within the public sector over the previous years.
Instead, the governments emphasis on policy and program renewal and subsequently
responding to international macroeconomic pressures were the predominant drivers
for change. If anything, the changes to policy and programs had a dampening effect on
agency level performance management improvements by diverting policy attention
from technical and allocative efficiency to macroeconomic initiatives. Although work
has continued on implementing Operation Sunlight, the reforms took a backseat while
the government and central agencies focused on the bigger fiscal picture.
Structural factors
Australia is essentially a Westminster style public administration system. It is
characterized by high levels of ministerial authority compared with more legalistic
systems used in other countries. Another key feature of the Australian system of
administration is the high degree of devolved authority and accountability to senior
managers, subject to limited legal controls focusing on principles rather than detailed
rules. Senior managers in the public service are career officials who are generally
appointed on the basis of a broad concept of merit rather than political affiliations. The
resultant administrative framework means that senior managers are expected to
implement the policies of whichever government is in power with equal vigour and
professionalism. Managers have considerable responsibility, authority and
accountability. Without the constraints of detailed laws, regulations and directions,
they rely on policy objectives, ministerial decisions and their own management and
organisational capabilities to perform their functions. A clear hierarchy exists in which
parliament makes laws and allocates resources, then governments implement laws and
policies through their agents in the form of departments and public authorities. This
environment provides fertile ground in which performance management arrangements
can grow. Performance management arrangements offer a mechanism to define and
measure what is required and what is achieved. The limitations of the Australian
administrative framework on performance management are that accountability for
performance is largely placed on agency managers while government ministers make
major resource allocation and policy decisions. The principal-agent problem is
obviously relevant to this situation as a driver of behaviour, as is the political
significance of perceived performance. This provides an incentive to promote positive
achievements and hide less flattering results.
A key feature of performance management in Australia has been the strong role
played by central agencies, particularly the Department of Finance[1] (Wanna et al.,

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2003; Bouckaert and Halligan, 2008). This has been important in both the design and
implementation of the system, which has supported and delivered the policy decisions
of politicians. An important consequence of the strong role played by Finance was that
the system was firmly built on the intention that performance information would be
used for budget planning and accountability. Less emphasis was placed on the
potential use of performance tools for the benefit of organizational or human resources
management, at least in the early phase. The system has been designed to provide
performance classifications that can be used for budget allocation, measurement of the
use of budgets, reporting on results in terms of the budget appropriations and forward
estimates for three years beyond the budget year. This has achieved the positive
benefit of focusing the minds of people within the budget system on categorization by
key performance objectives. Conversely, it has also contributed to classification of
performance for budget purposes taking precedence over the operational management
and learning function of performance information. Changes in the intended policy
outcomes are deliberately limited by procedures requiring a compelling case for
changes to high-level outcome and program definitions, which must be approved by
Finance. This helps to provide consistency and comparability for budgeting and
accountability, but can limit the value of the information produced for managing
agency performance.
Another important institution in Australia is the Australian National Audit Office
(ANAO) (Hawke, 2010; Blondal et al., 2008). The ANAO has been a major commentator
on the quality of performance management in Australia. Since the evaluation of the
FMIP in 1992, there has been no comprehensive evaluation of performance
management despite numerous limited reviews of reporting and significant changes
to financial management policies. In that environment, the ANAO has consistently
included performance information in its audit work program every few years and has
produced three better practice guides to assist agencies in meeting the needs of
government and the parliament. It has provided momentum for performance to remain
on the agenda of parliament as well as a means for the quality and value of
performance information to be improved.
More recently, the Department of the Prime Minister and Cabinet led the
development of a Blueprint for reform of public administration that has performance
management and capability as core elements of a broad strategy (Advisory Group on
Reform of Australian Government Administration, 2010). This is a potentially
important development because it offers the prospect of combining the efforts of the
Finance, the Department of Prime Minister and Cabinet (PMC) and the Australian
Public Service Commission (APSC) to achieve reform of policy, administration and
human resources. The government response to this initiative was initially very
enthusiastic and substantial resources were committed to implementation. More
recently, however, budget pressures and priorities for savings have eroded the
resources available for the initiative and the potential impact.
At the agency level, structure can play a significant role in the success of
performance management because it defines the lines of responsibility and
accountability and often the budget allocation within the agency. If organisational
structure is different to the structure of performance reporting requirements, the value
and usefulness of performance information is seriously undermined. However, it is not
unusual for this misalignment to occur in Australia. The ANAO found that
approximately one quarter of agencies surveyed reported that misalignment of

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organizational structures and performance reporting architecture was a disadvantage

(ANAO, 2007, p. 52). Over 90 percent of surveyed agencies reported that they monitor
performance primarily on the basis of their organisational structures for internal use
(ANAO, 2007, p. 72).

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Managerial factors
The devolved management framework in Australia has meant that management at the
agency level is crucial to the operation and success of the system. Central agencies
provide the instructions to line departments but the latter group has been primarily
responsible for implementing the instructions. They have interpreted the requirements
for their own agencies and have designed the performance measures and operational
arrangements which underpin the system. This has led to a wide array of approaches
and significant variation in the quality and usefulness of performance information at
the agency level. Managers either choose to meet the minimum requirements to
produce performance information for budgeting and external reporting, or they see
benefit in fashioning performance information to their own ends. In some agencies, this
results in an integrated performance system linking corporate strategy with budgets
and activities. In others, even some large organisations, there is no performance data
other than the high-level outcomes necessary to meet budgeting and appropriation
requirements (ANAO, 2007). At both of these extremes, and in between, management
has played an important part in designing the arrangements or choosing not to make
much effort to establish useful performance indicators.
In its 2007 audit of performance reporting in portfolio budget statements the ANAO
observed that, agencies often find it challenging to implement all the required
elements of such a regime in a manner that concisely reports on effectiveness and
efficiency (ANAO, 2007, p. 17). Not surprisingly, it found that, the extent to which
agencies had integrated outcomes and outputs information into agency operations
varied (ANAO, 2007, p. 25). More than one quarter of agencies surveyed did not
include performance information in any planning documents other than those required
for external use and were rarely, if ever, included in individual performance
agreements (ANAO, 2007, p. 53). Almost all surveyed agencies used information other
than publicly reported indicators for monitoring performance for operational
management and around 20 percent rarely or never used published performance
information for decision-making on agency priorities, budget plans or resource
allocation (ANAO, 2007, p. 72).
In 2011 the ANAO released a new report on performance information. Its findings
were consistent with previous audits in terms of the variability of performance
information across agencies and the significant scope for improvement across all
entities. It found that where agencies had clearly defined program objectives, it was
more likely that they would have meaningful and quantitative effectiveness indicators
and targets. Around one-third of the entities covered in the ANAO survey had
appropriate indicators, one-third had mixed quality indicators and the remaining
one-third required much further development (ANAO, 2011, pp. 17-18). The ANAO
concluded that, executive leadership is critical in emphasizing the importance of
performance information for decision-making, and in ensuring work is commissioned
to assess the effectiveness of KPIs (ANAO, 2011, p. 21).

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Technical factors
There can be little doubt that technical factors have a significant effect on the success
of performance management regimes. The academic and practitioner literature
abounds with examples of technical and administrative prerequisites for good
performance management, the impact of differences in the content and quality of
performance measures, the importance of data quality, and suitability of performance
information for various uses (Kusek and Rist, 2004; Hawthorn and McDavid, 2006;
Hatry, 2007; Arizti et al., 2010). This is demonstrably true in Australia from the earliest
reviews of the FMIP to the most recent audits by the ANAO.
A major factor that distinguishes Australia from many other countries that have
adopted performance management regimes is its emphasis on outcomes. Outcomes are
defined as the results, consequences or impacts of government actions (Department
of Finance and Deregulation, 2009a, p. 1). These are notoriously difficult matters to
encapsulate, measure and usefully apply and yet they are probably the most important
performance issues for public policy and administration in Australia. The Minister of
Finance stated in his update of Operation Sunlight in 2008 that, some outcomes are so
broad and general as to be virtually meaningless for Budget accounting purposes
leading taxpayers to only guess what billions of their dollars are being spent on
(Tanner, 2008, p. 4).
Outcomes are the basis for annual appropriations for budget dependent agencies.
They are also the basis for budget reporting and all other elements of the performance
management arrangements cascade downwards from the outcomes. Programs are
defined within outcomes; deliverables contribute to programs and performance
indicators are intended as a guide to the success of programs. If agencies experience
difficulty in choosing, specifying and managing with outcomes, then it is likely that
the subsidiary information will suffer either in terms of its usefulness in explaining
the outcomes, or in being able to draw together the subsidiary elements that are
intended to contribute to those outcomes. This effect was highlighted by the ANAO in
their most recent audit, as mentioned above (ANAO, 2011). The importance of having
good quality outcome definitions is well understood by the government. A key action
under Operation Sunlight was a comprehensive review of outcome statements,
resulting in revision of the number and content of outcomes across the national public
sector.
Outputs were one of the main elements of the performance management framework
from 1999 until 2009 when they were dropped from Finance guidance documents.
Their place in the framework was taken by other concepts, namely programs and
deliverables. Outputs had been criticised by the parliament and others as being
unhelpful in understanding performance and being difficult to link to the intended
outcomes. Having outcomes at a very high and broad level no doubt contributed to this
disconnection, and the lack of intermediate level indicators made it difficult to see and
understand the links. Programs were seen as a more relevant concept as they are set at
a higher level than many of the outputs and related more to policy initiatives and
groups of activities, which are more easily associated with an outcome (Parliament of
Australia, 2007; Murray, 2008). It is not clear whether the switch from outputs to
programs has improved the quality and usefulness of information for parliament
because the changes have not had time to be fully tested. Early indications are that
they will require substantial further work to be consistently better at presenting
performance information (ANAO, 2011).

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The impact at the agency level of changing from outputs to programs caused a
substantial reassessment and realignment of the performance management
framework. The agencies have experienced both positive and negative effects. The
positive effects were achieved through the process of reviewing and redefining the
means for contributing to outcomes, refreshing the indicators and measures in the
process. The negative effects arose from the destabilization of existing information
structures and systems and the costs of rebuilding them.
The concept of programs is not new to Australia. Programs were the basis for the
original system of performance management established in 1984. It had been replaced
with outcomes and outputs in the 1990s in an attempt to improve the precision and
focus of performance information on results rather than the previous preoccupation
with actions and intentions. Although the precise meaning and construction of
programs are different in the current context, it remains to be seen whether they will
suffer from the same weaknesses identified with the previous types of programs. It is
also a concern that the return to the program concept may have a longer term
destabilizing effect on the framework by weakening confidence in the stability of basic
technical features.
Implementation of performance management is not only dependent on the quality of
its technical design, but on the capacity of government officials to apply the
requirements. It is also dependent on the capacity of intended users to understand,
interpret and apply the knowledge that they obtain from performance data. An
important part of this aspect of implementation is the quality of guidance and training
for officials, managers and parliamentarians in how to understand and use the
information. Finance has released and updated guidance almost annually since the
introduction of the outcomes and outputs framework in 1998 (Department of Finance
and Administration, 1998) and provided access to training for agencies in the first few
years after its introduction until 2001. The ANAO has supplemented Finance guidance
with its own better practice guides in an attempt to bridge the gap between agency
capability and the quality of performance information seen as necessary for the
parliament (ANAO, 2004). There has been no specific training or guidance for
managers and parliamentarians in the interpretation or use of performance
information.
The ANAO identified lack of awareness and understanding of the requirements to
be a significant weakness in the implementation of Australias performance
management regime (ANAO, 2007). It recommended that Finance update its
guidance, facilitate the exchange of information and experience and provide ongoing
practical advice on implementation. Finance agreed to the recommendations and has
since provided updated guidance on various aspects of the performance management
arrangements (Department of Finance and Deregulation, 2009a, b, 2010). The recent
audit of performance information by the ANAO suggests that there remains a
weakness in knowledge and capability to implement the arrangements effectively and
further recommendations were made for Finance to improve its guidance (ANAO,
2011).
Cultural factors
The institutional framework for Australia has meant that the performance
management system evolved primarily through the actions of government and
officials, underpinned by some fundamental legislation and procedures relating to

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financial management and accountability and management of the public service. The
financial management and public service legislation sets out key principles for the
performance of functions and the management of staff in Australia and is an important
guide to the prevailing culture of the system. The Public Service Act 1999 (PS Act)
contains 15 explicit values and code of conduct that public servants are required to
adopt. Some core values in the list that are relevant to performance management
include accountability for action, responsiveness to government, delivery of services
fairly, impartially, courteously and effectively, and a focus on achieving results and
managing performance. The Financial Management and Accountability Act 1997
(FMA Act) requires agency heads to make efficient, effective, economical and ethical
use of resources (FMA Act, s.44). The formal cultural framework built into legislation
and regulation is consistent with performance management objectives. It is less clear
that informal culture offers similar complementarity to performance objectives and no
research is available to provide insight into this aspect.
Research undertaken by the APSC provides some appreciation of the application of
values in performance management. Each year the APSC prepares a State of the
Service report which, among other things, assesses the application of values under the
PS Act, based on an annual survey of employees. In 2009-10 the APS found that
91 percent of respondents believed that their supervisors always or usually acted in
accordance with the values. Although this seems very positive, the respondents also
rated public sector values, performance management, financial and program
management among the lowest core skills needed to do their jobs (APSC, 2010,
pp. 43-58). Considering the importance of each of those skills for effective performance
management, the survey results provide some cause for concern.
There are plans to revise the public service values under the PS Act in an effort to
simplify and improve the focus. In 2010 the APSC released for public comment a
proposal to reduce the number of values from 15 to five. The five values proposed were:
Committed to service; Ethical; Respectful; Accountable and Apolitical none of which
appear to contain the emphasis on results and performance included in the current
values set (APSC, 2010, p. 41). It is not clear how this will affect the culture of
performance management, but it is hard to see how exclusion of performance from the
values would be helpful.
Behavioural factors
Accountability is a strong element of budgetary management through extensive
regular reporting, parliamentary examination of budget estimates and outturns, and a
very active state audit function which produces performance audit reports on a diverse
range of activities each year. There is a strong incentive to ensure that obligations to
report on performance are met. Any failure to present information on performance runs
a high risk of being detected and exposed through monitoring by Finance, scrutiny of
budget related documents by the parliament or performance auditing by the ANAO.
Each year government agencies prepare very detailed portfolio budget statements,
incorporating extensive information on their outcomes and performance indicators to
assist the parliament in examining budgets. At the end of each year agencies are
required to produce similarly detailed reports on their achievements against the
indicators presented in their portfolio budget statements. This provides a strong
incentive for agencies to comply with the requirements for preparing and publishing
performance information.

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The emphasis on publishing performance information is, however, much stronger

than the emphasis on review of actual performance results. There is little evidence of
any review or oversight body calling an agency to account for underperformance
against published targets or indicators. This was a point emphasized by the Minister of
Finance in his 2008 update of Operation Sunlight (Tanner, 2008). Even within agencies,
the discussion of disappointing performance is very limited. For example, a study of
annual reports by agencies reveals very few instances of explanation for
underperformance or discussion of corrective measures (Government of Australia,
2011). Although there was a review of outcomes in 2008-09 across all departments,
initiated as part of Operation Sunlight, progress on review and revision of performance
indicators and targets is less evident. It may be too early to look for improvements in
the performance measures and targets, which could be expected to follow revision of
outcomes, however there are clear gaps between current practice and good quality
information (ANAO, 2011). Finance recognised the need to highlight the importance of
good performance indicators and it reissued guidance on performance indicators in
October 2010 to remind agencies of their obligations and to assist them to improve
quality (Department of Finance and Deregulation, 2010). In response to the ANAO 2011
audit of key performance indicators, Finance stated that it would be preparing a report
which compares 2009-2011 results against plans published in Portfolio Budget
Statements (ANAO, 2011, p. 25).
In this environment, the lack of careful scrutiny of performance information
provides an opportunity for providers of information to shape their reported
performance plans and results in ways that minimize their exposure to risk of criticism
without serious concerns about being challenged to deliver better results or more
appropriate performance indicators. This potential for self-protection is reinforced by
the strong political culture of avoiding criticism. The logical consequence is that
potentially controversial indicators and targets may be avoided, regardless of their
importance as guides to success in contributing to objectives or desired outcomes. In
the absence of internal demand or external quality assurance on the selection and use
of indicators, agencies are largely free to select indicators that will not draw unwanted
attention. The Australian authorities have recognised the importance of behaviour to
effective policy. In 2007 the APSC issued a series of publications on contemporary
government challenges, one of which was on changing behaviour (APSC, 2007). The
publication was focused on considering behaviour as a means of improving policy
effectiveness in the wider community, but many of the matters covered could be
applied equally to implementation of policy within government.
Success or stagnation?
There can be no doubt that changes have been made to the performance management
arrangements with the best intention of improving performance information and
reporting. In that regard, Australia cannot be accused of stagnation. It has a long
history of incremental reform and there is clear evidence of that trend continuing in
regard to performance management arrangements. The focus of Australias changes
during the last decade has been largely on the technical elements: outcomes have been
refined, programs have replaced outputs and agencies are being encouraged to
improve the quality of performance measures and targets (ANAO, 2011). New and
updated guidance has been issued by Finance to assist agencies in adapting to the new
refinements. External factors have played a significant part in the change. A new

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government was elected with a specific agenda for performance management reform,
and it has made progress on implementation of that agenda since taking office in 2007.
Other external factors have mitigated the progress by generating an urgency to focus
on macroeconomic and fiscal priorities rather than more detailed performance issues
such as efficiency and effectiveness.
Other than the technical, structural and external elements, however, there has been
little evidence of reform driven by the other influences on performance management
discussed in this paper. The managerial, cultural and behavioural factors have been
influential in the pattern of implementation, but they have not been used as tools to
refine and improve the system to date. The analysis provided in the previous section
identified a number of areas where the effects of each factor can undermine or mitigate
the success of performance management, but these effects have not been addressed in
any substantive way as part of the reform agenda.
Although stagnation can be ruled out, success still cannot be claimed. The latest
available evidence indicates that the quality of performance information still leaves
much to be desired (for example, see ANAO, 2007, 2011). The use of performance
information appears limited, even in the agencies that produce it, despite the wide
availability of performance data and reports. There is also little indication that
Australia is moving towards a more sophisticated type of performance management
system in terms of the Bouckaert and Halligan classification (Bouckaert and Halligan,
2008). The refinements being implemented appear to be strengthening its status as a
performance management system rather than underpinning an evolution to
performance governance. The persistent problems identified with the quality of
performance information, particularly relating to effectiveness, and the ongoing
variation between agencies with acceptable and inadequate performance information
remains a barrier for further progression (ANAO, 2011). While there have been
pronouncements by the government and others which call for adoption of some
elements of performance governance (see Advisory Group on Reform of Australian
Government Administration, 2010, for example), evidence of progress along those lines
has not been detected to date.
It may be too early to tell if the changes arising from technical refinements
introduced after the change of government in 2007 will have a major effect on the
success of performance management in terms of quality and use of information. It is a
matter for concern, however, that many of the factors impinging on performance
management have not changed, offering some cause for pessimism (ANAO, 2011).
Future directions in public sector performance management for Australia
Australian performance management continues to be a work in progress. Based on its
approach to date, and the supportive environment for maintaining performance
management arrangements, Australia can be expected to explore further refinements
in the future. Changes proposed to the values under the PS Act following from the
Blueprint recommendations and increasing attention to performance information, as
adopted under Operation Sunlight, are some potentially important changes to come.
These developments could bring about cultural and behavioural changes in
performance management to complement the technical refinements. Movements in
the external environment may also have an impact on the pace and nature of
performance management change. For example, the minority government that
emerged from the 2010 election, and resulting increase in power of independent

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members and smaller parties, could lead to increasing emphasis on performance and
broader community engagement by the government. Alternatively, it could result in
greater politicization of performance and emphasis on damage control rather than
constructive improvement.
The framework applied to analysis of Australias performance management in this
study has pointed to some significant strengths and weaknesses that should be taken
into account by policy makers going forward. The academic and practitioner literature
provides substantial coverage on technical and institutional factors as being a major
influence on the success of performance management (De Lancer Julnes, 2008; Hatry,
2007). Australia has performed strongly in terms of these factors, both in design and
scope, encompassing outcomes and effectiveness more extensively than many other
countries (OECD, 2007). The future of technical and institutional influences appears to
entail further refinement and clarification of the existing framework. The ANAO
findings indicate that there are many gaps in the application of current requirements
and Finance has demonstrated an intention to work on addressing these weaknesses
(ANAO, 2011).
The extent to which the government is successful in improving performance
management will depend on all factors highlighted in this study, not just the ones that
they have relied on to drive reform in the past. Cultural factors can have a powerful
impact on the quality of implementation and use of performance information (Pandey
and Moynihan, 2008), however this does not seem to have been a major part of the
government strategy for improvement. Instead, the emphasis on culture has been
peripheral to the operations of performance management and possibly declining in
importance as a component of public service values. The significance of behavioural
factors is limited in the Australian system because of the general weakness and
variation in quality of performance measures and targets within and across agencies
(ANAO, 2011). This is likely to be increasingly important as an influence of the success
of performance management as agencies respond to the ANAO recommendations and
decision makers pay more attention to the variation between performance plans and
results. This has the potential to be a double-edged sword which both increases the
quality of performance information and strengthens incentives for adapting
performance measures to the benefit of producers rather than users of the
information (Radnor, 2008; Radin, 2006).
As highlighted by the ANAO, public sector leaders can play a powerful role in
improving the success of public sector performance management arrangements
(ANAO, 2011). This echoes findings in the performance literature that leadership is
very important (De Lancer Julnes, 2008; Pandey and Moynihan, 2008; Kotter, 2007).
The Management Advisory Committee has been a strong voice in advocating the value
of performance management as a means to improve policy outcomes (Management
Advisory Committee, 2001), however it is not clear that this message has been heard or,
more importantly, taken up at the agency level. An important challenge for Australia
will be to identify how management at the agency level can be universally convinced to
apply the framework effectively.
Conclusion
This paper has examined the evolution of Australias public sector performance
management regime in the context of six key influences on success. It has explained
that Australian public sector performance management has proven to be resilient and

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continues to function and evolve, exhibiting new initiatives and refinements every few
years. The paper has highlighted the paramount importance of external political
factors in establishing and retaining the system. It has also pointed to the importance
of technical and structural factors in refining and maintaining the system. Successive
governments from both major political perspectives have demonstrated a willingness
to retain performance management arrangements but at the same time have displayed
an irresistible propensity to make changes. The crucial roles played by Finance and the
ANAO have shaped and strengthened the framework through ongoing refinement and
maintaining a focus on accountability. Technical factors have been important in
shaping the design and also setting the foundations for good quality information and
systems. The academic and practitioner literature acknowledges that those elements
are vital, though not sufficient to ensure the achievement of public sector performance
management at a high standard (Van Dooren and Van de Walle, 2008).
The success of the framework continues to be limited by weaknesses that have been
documented since the performance management system was introduced almost three
decades ago. In particular, the variability and general weakness in the quality of
performance measures have been identified as persistent challenges (ANAO, 2011;
Parliament of Australia, 2007). Despite efforts to improve the performance
management framework and broaden its span, the system has not been able to
resolve the ongoing challenges or evolve from a performance management system to
a performance governance system (Bouckaert and Halligan, 2008).
The paper has identified some possible reasons for the difficulties faced by
Australia in overcoming persistent challenges. It notes that, despite the strength in
addressing some of the key factors for successful performance management, there are
some areas which have received relatively less attention and may provide the means to
progress more effectively. These factors are management (Moynihan, 2008), behaviour
(Radin, 2006) and culture (De Bruijn, 2007). Although the importance of those factors
has been acknowledged by governments and officials in Australia (Advisory Group on
Reform of Australian Government Administration, 2010; ANAO, 2011; Tanner, 2008)
there appears to be considerable scope to increase effort to take them into account in
refinement of the system.
More research is needed in Australia to understand the significance of all six factors
discussed in this paper in shaping public sector performance management. This paper
illustrates that each of the factors has influenced the progress of performance
management at the national level, however additional work is needed to understand
more fully the effects of each factor and the significance of their interaction. The
reviews and studies discussed in the paper, particularly the work of the ANAO,
indicate that considerable variation in quality and use of performance information
exists at the agency or organizational level. It is likely that a better understanding of
the influence of the six factors could be obtained by studying the variation in their
impact within and across agencies, in addition to work at the national level.
Australia is not unique in struggling to address the deficiencies in quality of
performance management. For example, in 2010 the UKs National Audit Office
observed that, despite improvements, around 40 percent of public service agreement
data systems were not fit for purpose and strengthening was necessary across the
framework (National Audit Office, 2010). Like Australia, the UK has had a long
experience in using and refining its performance management system but clearly has
scope for further improvement. Other countries with less experience are also having

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difficulties in achieving success with performance management arrangements (Arizti

et al., 2010). There would be merit in review of other country experiences using the
framework adopted in this paper to examine the significance of the six factors, and
their interaction, on the success of performance management.
Note
1. The Department of Finances name was changed to the Department of Finance and
Administration and subsequently to the Department of Finance and Deregulation but its
responsibility for performance management policy has remained largely unchanged since
1984. In the remainder of this paper it is referred to as Finance for simplicity and to avoid
any confusion.
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Corresponding author
Lewis Hawke can be contacted at: apozema@gmail.com

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