Factors Influencing the Use of Performance Information for Decision Making

Performance measurement is an increasingly important process in today's organisations. This is true for not only business or private sector organisations, but also public sector organisations. Against the backdrop of budgetary constraints and the need for guaranteeing the effectiveness of public programs, performance data is crucial for decision making in the public sector. From the health and education sectors to criminal justice agencies, government agencies and organisations are ever keener on outputs and outcomes. Performance measurement frameworks such as benchmarking and the balanced score card are now utilised to inform decision making. For instance, performance measurement enables the government to evaluate the effectiveness of a given policy or initiative. Based on the findings, decisions can then be made to expand or discontinue the initiative.

Given the unique characteristics of the public sector, it is imperative to understand the factors that drive the use of performance information in decision making. In her research, Taylor (n.d.) seeks to answer this fundamental question. She postulates a number of hypotheses. First, she hypothesizes that "the quality of an agency's performance measurement system is significantly related to its official's use of performance information for decision making." In other words, whether or not public sector organisations use performance information in decision making is dependent on the strength of the performance measurement system. How is the performance data useful and relevant to the organisation? How realistic are the performance targets? How frequently is performance measurement done? It is not difficult to agree with this hypothesis. In my view, it would be quite unrealistic to expect an organisation to use performance information in decision making if the performance measurement system is not rigorous enough in terms of relevance, practicability, and frequency.

The second hypothesis is that "rational and hierarchical organisational cultures in an agency are significantly related to its official's use of performance information for decision making more than group and developmental cultures" (Taylor, n.d.). Simply, whether or not an organisation uses performance information in decision making is a factor of the underlying organisational culture. The influence of organisational culture on organisational behaviour cannot be overemphasised. Organisational culture dictates how things in an organisation are done, including performance measurement. Therefore, an organisation that views performance measurement as part of its norms is more likely to use performance information in decision making than one that does not. For Taylor (n.d.), cultures that emphasise internal efficiency, productivity, and performance are more likely to use performance information in decision making compared to cultures preoccupied with employees, flexibility, and employees.

Taylor (n.d.) further hypothesizes that "stakeholder support for an agency's performance measurement system is significantly related to its officials' use of performance information for decision making." Any organisation is surrounded by various key stakeholders -- ranging from employees to the government. For public sector organisations, the influence and power of key stakeholders can often be immense. Legislators comprise one of the important stakeholder groups for public sector organisations. If legislators do not see the need for performance measurement, then it is unlikely that a public-sector organisation will use performance information in decision making.

Another factor that Taylor (n.d.) hypothesises to influence the use of performance information in decision making in the public sector is the external environment: "an agency's external environment is significantly related to its officials' use of performance information for decision making." It is quite easy to agree with this hypothesis. One of the major elements of the external environment that affect public sector organisations is the political environment. In most cases, public sector organisations must consider the underlying political environment in decision making. This means that public sector organisations are more likely to make decisions based on political support as opposed to their actual performance. For public sector organisations, acting in favour of external stakeholders is crucial for minimising or avoiding public scrutiny.

The fifth hypothesis is that "the officials' perceptions on the impact of performance measurement in their agency are significantly related to their use of performance information for decision making" (Taylor, n.d.). In other words, the use of performance information in decision making is influenced by not only internal and external factors, but also individual factors. What are the perceptions of public officials about performance measurement systems? Do they see them as beneficial for accountability and efficiency? Public officials are key decision makers within public sector organisations. Therefore, whether or not an initiative is implemented may, to some extent, be dependent on their perceptions about the initiative, especially in terms of its benefits and shortcomings.

Taylor (n.d.) tests her hypotheses by surveying 40 government agencies in diverse fields. The study finds that only the quality of the agency's performance measurement system and officials' attitudes towards performance information are significantly associated with the use of performance information in decision making. The other three factors -- external environment, organisational culture, and stakeholder support -- were found to have little impact on the use of performance information in decision making. This is quite surprising as I expected these three factors to actually have a greater impact on the use of performance information compared to the quality of the performance measurement system and individual perceptions. In essence, I expected all the five factors to have a significant impact on the use of performance information in decision making. However, as it turned out, the use of performance information is ultimately dependent on the extent to which public officials believe performance information will be beneficial to their organisation.

Reference

Taylor, J. (n.d.). Factors influencing the use of performance information for decision making in Australian state agencies. Public Administration.