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

A Primer on Performance Budgeting 149
New Zealand: Performance Management Paradigm in the Form
of Contractualism
New Zealand is at the forefront in transforming the public sector by using a
private sector management and measurement approach to core government
functions. New Zealand revamped its tenured civil service and made all public
positions contractual, on the basis of an agreed set of results. Agency heads
are required to negotiate purchase agreements with their ministers and are
held responsible for the delivery and reporting of expected outputs relative
to targets and budget. Statements of intent commit ministers to achieving
progress toward outcomes. Employees negotiate individual contracts with
agencies. Program management was decentralized at delivery points, and
managers were given flexibility and autonomy in budgetary allocations and
program implementation within the policy framework and the defined
budget. The accrual-based budgeting and accounting system can provide a
complete picture of the resource cost of each public sector activity (Treasury
Board of Canada 2003). The contractualism version of outputs accountability
in the public sector introduced by New Zealand led to significant improvement
in the machinery of government and in the fiscal performance of the
state sector. Departments have a clearer idea than they used to of what is
expected of them, their output is specified and fully costed, chief executives
have broad discretion to manage resources and operations, ministers have
choice in obtaining outputs, and the overall public sector is leaner and
more efficient.
Sweden: Deregulated Human Resource Management
In Sweden, directors general of agencies are responsible for recruiting, grading,
and dismissing their staff members. There is no civil service in the government
as a whole. Vacancies are generally advertised in the press, and all qualified
applicants are treated equally. Staff members are not tenured. There is no
difference between the labor legislation governing the public sector and that
governing the private sector. Personnel cost is one of many items of expenditure
that agency directors general must manage within the limit of their single
operating appropriation. The Ministry of Finance and Parliament do not have
any direct say in pay arrangements and other conditions of employment for
government employees. The experience with this new framework has been
predominantly positive. The increased responsibility for wage formation and
employer policies in general has been well received by agencies. Significant
variations in the pay agreement between agencies are evident, and it is
estimated that more than 90 percent of government employees in Sweden
now receive individualized salaries—that is, salaries based on their personal
performance. Public sector unions have been constructive partners in this
area (Blöndal 2003).
Source: Authors’ compilation.