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THE PRODUCTIVITY COUNCIL: Measuring public service productivity


Olivia A. Smith, senior economist

THE PRODUCTIVITY COUNCIL: Measuring public service productivity

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What exactly do we mean when we say productivity in the public sector? Is it real or elusive? Is it an oxymoron?

Productivity does indeed apply to the public sector. There are four dimensions of public sector performance – stabilisation and growth of the economy, distribution of welfare, allocation of public services, and quality of public administration. It also refers to the efficient use of Government’s resources: people, time, money and information technology, to produce a good or service efficiently and effectively and contribute to socio-economic development of the country. Government seeks to maximise the ratio of outputs to inputs by minimising or maintaining the year-on-year level of inputs compared to maintaining or increasing the year-on-year level of outputs.

This essentially follows the components of what is called the Logic Model:

Inputs -> Activities -> Outputs -> Immediate Outcomes -> Intermediate Outcomes -> Ultimate Outcomes

According to Pollitt and Bouckaert (2004) in Public Management Reform: A Comparative Analysis, public sector productivity may increase for a variety of reasons: where resources (inputs) decrease and outputs increase, where resources remain the same and outputs increase, where resources increase but outputs increase by an even larger amount, where outputs remain static but resources decrease, where outputs decrease but inputs decrease by an even larger amount

Government has the ultimate responsibility for ensuring that the resources spent generate the highest return on investment possible or the highest level of accelerated development possible on a consistent basis. The Institute of Public Administration in a paper called Measuring Public Sector Productivity: Lessons from International Experience notes “Health, education and similar activities absorb a large share of the government payroll and the personnel who work for government . . . . If mostly higher salaries absorb additional resources allocated to these activities and the higher salaries are not accompanied by higher productivity of the public employees, then higher public spending can be unproductive and produce little additional benefits to the students or patients.”

The question which occurs prominently in peoples’ minds is: how do you measure public sector productivity? Assessing productivity for public services is more difficult. There is no market demand, market supply or equilibrium price in health care, education, social services or national security, so there is limited price information. How the service is provided is what we examine. A service is an output – the activities conducted to produce that output, such as the process, timeliness and standard of those activities are what we are concerned with and therefore what we measure. Therefore, efficiency and standards of delivery which meet the clients’ expectations are what we have to be concerned with. So if asked whether one can indeed measure a service, the answer is, of course, you can.

However, we must be very careful what we measure. In the case of the health sector, how do we determine productivity? Is it a hospital at 100 per cent capacity so we know that the nurses, auxiliary staff and doctors must also be working hard? Or are we concerned with the standard of health care provided, the minimum number of bed nights used given a particular illness, the most efficient dispensing of prescription drugs, efficient operating costs, and most importantly the delivery of preventative health care. The point being made here is that productivity in the public sector is not just a measure of activity, but rather of efficiency, standards, outcomes and development.

Another idiosyncrasy frequently debated in the public sector is that of the attendance at meetings. Civil servants at all levels attend several meetings; it is an activity to be loved or loathed. However, there is such a thing as a productive meeting – one that is punctual, runs to schedule, completes the pre-determined agenda and itemises the key outcomes/decisions, and meets its stated objective. In a world of technology, meetings can also be convened via the web and in a paperless environment. Where meetings must be convened as part of a project, then these must be factored as part of the timeline and be conducted as efficiently as possible to prevent project overruns or delays. However, meetings in whole or in part are not enough for an employee to labelled as productive. How can we reward an individual for the number of meetings attended? How do meetings aid the organisation in achieving its objectives? Meetings are a necessary evil, but are an insufficient indicator of performance. After the meeting is adjourned, the substantive work remains to be done.

Public Sector productivity is therefore not elusive nor “pie-in-the-sky”. Like productivity in private sector organisations, it must be measured and more importantly effectively managed. There are activities in the public sector which can be measured, but we must be careful to measure activities which produce outputs and developmental outcomes. Congruently, we must link activities to cost (monies spent in the execution of projects and programmes) and further seek to cost activities which might otherwise go unnoticed – absenteeism; the cost of attending meetings; rework and wastage. In another article, we will look at activity-based budgeting in the public sector.

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