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The public sector performance paradox

18 October 2021



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Assessing performance in the public sector has led to several unintended consequences. These include the performance paradox, tunnel vision and “analysis paralysis”. A paper in Public Performance and Management Review argues these unintended consequences can:

  • reduce the quality of what is known about actual performance
  • negatively affect performance.

Performance assessment in the public sector

The increased attention on public sector performance coincided with the new public management reforms of the 1980s. These reforms had two objectives:

  • budget savings
  • Improving the efficiency and effectiveness of government bureaucracy. This involved the introduction of market-type mechanisms such as privatisation, competitive tendering and vouchers.

The reforms also involved the adoption of private sector techniques to measure and improve performance such as the use of performance indicators. While the changes were fed by a strong belief in the measurability of performance in the public sector, this belief may have been simplistic.

Unintended consequences

Since the reforms were initiated, it is clear that public sector performance assessment is not without its problems or unintended consequences. One problem is performance information that is not reliable, valid and credible. This can be caused by wrong assumptions underlying the development of indicators and errors in measurement.

The use of performance indicators can also inhibit innovation. It can also lead to tunnel vision. This is where there is an emphasis on phenomena that can be quantified in the performance measurement scheme at the expense of unquantified aspects of performance.

Another unintended side effect is sub-optimisation where managers focus on narrow local objectives at the expense of broader organisational objectives. There can also be a fixation on single measures of success rather than the underlying performance objective.

The performance paradox

The performance paradox refers to a weak correlation between performance indicators and performance itself. This phenomenon is caused by the tendency of performance indicators to run down over time. They lose their value as measurements of performance and can no longer discriminate between good and bad performers. As a result, the relationship between actual and reported performance declines.

Four factors cause the deterioration of performance indicators:

  1. Positive learning: As performance improves, indicators lose their sensitivity in detecting bad performance. In fact, everybody has become so good at what they do that the indicator becomes obsolete.
  2. Perverse learning: When organisations or individuals have learned which aspects of performance are measured (and which are not), they can use that information to manipulate their assessments.
  3. Selection: This refers to the replacement of poor performers with better performers which then reduces differences in performance. Only good performers remain, and the indicator loses its discriminating value.
  4. Suppression: This occurs when differences in performance are ignored.

The paradox is not about performance itself but about the reports on performance. This can be unintentional or deliberate.

Unintended performance paradox

An unintended performance paradox can be the result of minimal accountability requirements. The fewer the number of performance indicators, the more difficult it becomes to obtain an accurate report of the performance.

A second cause is the elusiveness of policy objectives. Public policies often have many and sometimes contradictory goals. Consequently, performance indicators are usually not neutral but contested measures in the public sector. This ambiguity complicates the evaluation of the efficiency and effectiveness of policy implementation as it is difficult to determine which objectives are most important.

The chance of an unintended performance paradox occurring is enhanced by a strong emphasis on monitoring and efficiency within the organisation. Extensive use of performance indicators can create a situation in which agents learn what aspects of their work are important to the principal. By increasing the efficiency and effectiveness of those aspects, agents can game the performance system.

Deliberate performance paradox

Public sector organisations can also deliberately evoke a performance paradox. For example, they can “sabotage” an audit when they consider it an act of distrust.

Organisations can also try to hide poor performance by misrepresenting or misinterpreting performance indicators. They can restrict performance reporting to parts of the organisation that are most efficient (sub-optimisation) or on short-term objectives.

Detecting and preventing a performance paradox

It is not easy to trace a performance paradox in progress. Not only can it take different forms, it can also be the unintended result of a number of variables. These include:

  • government demands
  • the type of task to be carried out
  • the vagueness or contradictory nature of policy objectives
  • organisational capabilities.

Several strategies are available to trace a performance paradox. Ideally, a comparison of reported and actual performance is the best way. However, such a comparison is difficult to make because of the lack of comparative information.

Alternative methods are:

  • using external sources such as an ombudsman or client panels
  • developing new performance indicators from the existing indicators
  • analysing the performance assessment system.

The bottom line

Performance assessment in the public can have several unintended consequences, threatening insight into levels of performance. To counteract these consequences, performance assessment systems should take into account the special characteristics of the public sector.

The contested nature of performance indicators requires:

  • the use of multiple indicators related to different aspects of policy implementation
  • reflecting the interests of all stakeholders (politicians, managers, funders, providers, purchasers and users).

A balance also has to be found between too much and not enough pressure to measure results.

Want to read more?

The performance paradox in the public sector – Sandra van Thiel & Frans L. Leeuw, Public Performance and Management Review, January 2016

The original article is available via individual subscription to the journal or institutional access through a library service such as a university library, state library or government library.

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Published Date: 18 October 2021