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

A Primer on Performance Budgeting 147
reward public servants. The contract-based approach rewards the chief
executive financially if the organization achieves its performance targets.
The empowerment approach holds that public servants are more motivated
by the intrinsic rewards of public service than by material benefits. The
contract-based approach relies on incentives and competitive market
mechanisms to hold public managers accountable. The empowerment
approach simply hopes that managers will be ethically and professionally
motivated to perform.
It is important to stress that managerial accountability must be based
on outputs rather than outcomes, because outcomes are beyond managers’
direct control, difficult to define and quantify, and impossible to use as a
costing basis. There are three major justifications for including output-based
accountability. First, it is difficult or implausible to link outcomes directly
with managerial actions and decisions because outcomes are remote in time
and space from program activities and outcomes interact with other factors.
The extent of a manager’s direct control over outputs is usually much more
substantial than his or her control over outcomes. Second, outcomes are
immensely difficult to identify and certainly difficult to quantify. The time
scale for measuring outcomes normally spans some time after the program
intervention, a period not generally in sync with the budgeting cycle. Third,
calculating the cost of the effort to achieve outcomes can be more difficult
than costing outputs (Kristensen, Groszyk, and Bühler 2002). Outcomes
typically are achieved not as the result of a single intervention by one program
in isolation but through the interaction of a number of different planned
and unplanned factors and interventions. Hence, it is inappropriate and
unrealistic to hold public managers accountable for outcomes. The focus on
outputs, as practiced in Malaysia and New Zealand, offers greater potential
for accountability for results. Outcomes, however, should be monitored; an
exclusive emphasis on quantitative output measures without a focus of at
least some form on outcomes can distort attention in delivery agencies. It
raises the risk that such agencies will lose sight of the bigger picture: the
impact of programs on citizens and society.
On the way to fostering outputs-based accountability, it is essential to
provide more managerial flexibility by relaxing central input controls. Relaxing
central input controls occurs at two levels. First is the consolidation of
various budget lines into a single appropriation for all operating costs
(salaries, travel, supplies, and so on). Second is the relaxation of a variety of
central management rules that inhibit managerial flexibility—particularly
in personnel management, where most central rules focus. Because personnel