Public Sector Governance and Accountability Series: Budgeting and ...

146 Anwar Shah and Chunli Shen
rather than a single measure derives from the uncertain and blurred relationship
between inputs, process, and results—an inherent feature of public
programs. In other words, the outcomes or service quality associated with
a government program cannot be inferred just by reporting its outputs.
Therefore, one must monitor the entire results-based chain in order to
understand and effectively manage government programs.
Output-Focused Performance Management Paradigm
Performance management is a prerequisite for the success of performance
budgeting. Governments that do not manage for results do not budget for
results. Performance budgeting cannot thrive unless it is built into an overall
managerial strategy for performance. Donald Kettl (2000) distinguishes
two sets of performance management strategies, one relying on market-like
arrangements and the other relying on managerial norms and competence
(table 5.4). The first, “making managers manage,” is used by New Zealand
to specify contracts with budgetary allocations and competitive pressures.
The second, “letting managers manage,” is practiced in Australia and
Sweden. Both strategies provide the flexibility that public managers need to
improve performance. The critical differences are the reliance on incentives
and competitive spirit in the first strategy and on goodwill and trust in the
second strategy. The two approaches take different perspectives on how to
TABLE 5.4 Comparison of Two Performance Management Approaches
Theoretical models Make the managers manage Let the managers manage
Strategy Market-like arrangements Managerial norms and
competence
Mechanism Contracts Empowerment
Commonality Gives public managers the
flexibility they need to
improve performance
Difference Uses specific, tightly written Implicitly trusts public managers
performance contracts that to exercise their judgment
leave little room for trust intelligently
Motivates improvements with
extrinsic rewards
Motivates primarily by the
intrinsic rewards of public
service
Example New Zealand Australia and Sweden
Source: Adapted from Kettl 2000.