Public service organizations are the sectors that always receive considerable attention form the government. Beside their currently lower level of performance compare to private organizations, the attention is given due to governmental responsibilities is fulfilling demands of the people. Recently, the public service sector is evolving, partly due to the influence of a new management system called Outcome Based Management.
In this paper, I am discussing the contents and philosophy of the Outcome Based management approach and how it influenced the public service sector in United States.
- Outcome Based Management
II.1. Emerging Trend
Outcome based management (OBM) is the managerial framework that emphasizes more on forward looking activities. This managerial approach focuses on why are things done and what have actually been done. In a simple sentence, the term encourages managing for actual results. The term is often identified with the sentence: “better planning generates better outcomes”. The managerial framework first gained attention of public organization’s managers because of its commitment toward results.
The public service is always known lo lag behind the private sector because of its weak commitment toward real achievements. This is reveled in various sectors of the public sector, including the environmental sector, health sector and even child-care. These sectors required a system that works based on real-hard results, and OBM’s characteristic that put forth alignment between services delivered and actual goal achievements is a dominant catalyst in the adoption of this concept into the public service sector.
II.2. Elements of OBM
There are several elements of OBM. The first is the outcome itself. Outcome is the impact, result or consequences for the organization of related parties. If the outcome of a particular project matched existing corporate objective, then the company have successfully performed the OBM. The second element of OBM is the services given. They are tools to achieve the outcomes determined earlier. The third element is the Key Performance Indicators. The performance indicators function as an analysis tool that determines whether the targeted outcomes are achieved or not.
The traditional perspective perceived a company to perform three important activities, which are: planning, budgeting and reporting. According to the OBM perspective however, these activities can be explained further using a chain of detailed process, which includes:
- Formulation of corporate goals and strategic outcomes
- Formulation of mission statement and the strategic plan
- Formulation of budgets, including key performance indicator targets
- Delivery of services
- Performance reporting in annual reports
- Performance assessment
Outcome is simply the reason why corporate activities are performed. There are actually three levels of outcomes, the first is corporate goals. It is the highest level of outcome and the most general one. The second is called strategic outcomes, which relate corporate goals into these parties: the people in general (community), the environment, the economy, the region and governance. Considerations of these factors brought to the finding of strategic outcomes. The third is called agency-level outcomes, which functions are to detail the general outcomes into more specific targets. The formulation of agency-level outcomes is the final step before performing the services
Clearly defining corporate outcomes are important element of the OBM application. This is true because the outcome information will be used to direct the organization within its activities. For example, the outcome information is generally used by the corporate management to: trigger corrective actions like identifying problem areas that requires attention; identify best practices; motivate employees and to perform planning and budgeting activities. The outcome objective can also be used by external parties to: perform economic analysis, provide informed commentary, and perform benchmarking.
The next step in OBM after properly defining the right goals, strategic level outcomes and agency level outcomes is defining how each unit could contribute to the achievement of organizational goals. OBM stresses on the importance in finding the link between the desired outcome and the services delivered. This is necessary because according to the OBM resource should be allocated to any unit unless it can contribute to the achievement of organizational goals. Alignment between the goals and the service provided is a must because once such an alignment is achieved; the collection of costs and performance data is easier to perform.
After defining the specific agendas of each unit of the organization, the next step within OBM is reviewing the service agendas. The common practice in OBM organizations is by developing a service checklist that will enable them to evaluate whether the services delivered are the right ones.
- Performance Indicators
The third step in the application of OBM is developing performance indicators. The presence of the right performance indicators will allow performances to be measured, evaluated, and improved. The general performance indicators in OBM are divided into two categories, which are: effectiveness indicators and efficiency indicators. The two categories should have at least three characteristics, which are: relevance, appropriateness and fair representative ness. Defining these indicators enables the organization to perform continuous improvement by identifying emerging issues and specify the best services to deal with the issues, and furthermore, improve organizational accountability.
II.3. Expert’s Opinion about OBM
The ideal implementation of the OBM concept supposedly generates the following conditions:
- Encourages information sharing between employees and externally with clients, partners, etc
- Encourage communication of organizational achievements
- Easier and more effective reporting activities
- Increased flexibility and scalability
- Lead to effective use of available business information for analytical reporting, decision making and forecasting.
- Improve operational efficiency
- Increased profitability from relationship with partners and suppliers
- Drive operating staff toward the achievements of strategic results, etc
Taking account of these achievements, the OBM concept is generally benefiting organizations as a whole, particularly the less committed public service organizations. There are however, obstacles that must be faced.
In the process of defining outcomes and unit contribution to that outcome, there are individuals and parts of the organization that are reluctant to share data due to fear of inaccuracy or more often, unfavorable interpretation. The second challenge is caused by the tendency of people that have invested in their data collection to be unwilling to share the information due to the loss of credit in the work involved.
The third challenge is cost oriented. Some data required to achieve accurate measurement are more expensive than others. The fourth challenge is simply caused by the fear of being judged for something that we cannot control. In many sectors, like the environmental and health sectors, there are often uncontrollable variables that considerably affect the achievements of organizational goals. Including these factors in the evaluation system will be inaccurate and furthermore, most likely become the source of discontent ness among employees.
II.4. Identification of the Trend
Organizations and institutions that use OBM concepts generally have specific characteristics within them. The implementation of OBM is similar in various sectors despite the different services offered by the sectors. The implementation can be detected in the form of steps performed to identify goals and linking them to services performed. The amount of resources and time dedicated to each step might differ from one industry to the others depending on the difficulty of performing each step, but the steps that are performed are generally within the same order.
For example, in the environmental public services, the amount of resources committed to define the desirable outcome is quite enormous and significantly larger than other sectors; This is due to the difficult nature of defining the suitable environmental targets to be achieved from environmental projects. In health care sector and child care sector on the other hand, identifying what services to perform in order to achieve identified goals are the most difficult step and the one requires most observations. These sectors however, are all performing similar elements of the OBM approach.
- Implications for the Public Service
III.1. Unique Sector
Public service is generally known as governmentally-run organizations which all resources are generated from the government and thus, from the public themselves. If we are to study the development of this sector however, it is necessary to reveal how the public service sector is rationally different from the private sector. The most basic difference is the fact that in the private sector, most activities started at the supply side. Technology, for instance, is known as a tremendous catalyst from the supply side of business in the private sector that generates dramatic changes in various industries.
In the public service sector on the other hand, the main intervention that leads to change originated from the demand side. Ironically, there are generally little chances to charge the public directly for the services they receive. Governmental taxes are the media that connects the payment between the public and the public sector workers. In addition of becoming a tool of delivering what the public needs, the public sector is also the tool to create a balance in the private sectors’ operations. In the transport and utilities sector for example, where networks grows and the element for natural monopoly is strong, public involvement is required to prevent market failures and the abuse of market positions (François, 2003).
In the light of this unique structure, we can logically guest that the problem with public service sector is actually the presence of the government as an intermediary party itself. In the private sector, people are working for their customers and they gain payments from them as well. This trade between service and payments happens dynamically and each side can influence the trade. In other words, it is easier for the private sector workers to influence the amount of payment they will receive. In the public sector on the other hand, people are working for the government. Workers are not in direct trade of service and payments as the private sector. It is harder for them to influence the amount of payment they will receive (Glaeser, 2003).
In discussions of why productivity and efficiency in the public sector is often considered worse than the private sectors, many factors are mentioned, but the condition revealed above is one of the reasons often mentioned. The private sector workers are generally more motivated because in their frame of mind they have a way of influencing their own destiny. The public sector workers on the other hand, are working for different people than the one signing their checks. Knowing that the quality of their work will not influence their salaries, public sector workers are subject to a declining working motivation (Disney, 1998).
In addition to the general problem mentioned above, there are also other issues that are parts of the new development of the public service sector in United States. Political leaders indicated the need to recruit the next generation of public sector workers. It is believed that the public service sector environment today has already evolved into phases that are out of the older-generation’s league. The new system of management requires new workers with the ability to learn and adapt to the evolved conditions of the public service sector.
Others however, believed that such a change will not be beneficial due to the similar image of the job. Workers at the public service sector are still viewed as a ‘public servant’, a phrase which are highly unpopular in American society. Despite the enhanced system of management, if the government is unable to maintain change this image, the new workers are still going to be the ‘new generation of public servants’, in the sense that they have minimum bargaining power over the services they provide and salaries they receive.
Another issue in the public service sector, particularly in the United States is the ageing structure of the public service workers. Statistics indicated that with the reluctance of young people in entering the sector leave only old people within the sector. This will obviously mean a degradation of management quality within the public service sector. Another study indicated that information deficiency is significant problem in managing public services. The information regarding desired outcome are generally owned by the lowest people in the managerial chain, while the strategic decisions are made by the government which has little access to the information (‘Challenges’, 2008).
III.3. Implications of the OBM Approach
III.3.1. New Systems
The application of the OBM approach to the public service sector might address several of the problems mentioned earlier. For example, the lack of motivation could be solved by better focus on actual results and linking organizational objectives directly to services performed. Successful application however, requires adaptation to the steps and elements of the OBM approach.
In the public service organization, the desired outcomes can be those specified in the annual budget statements or those identified in legislation and specified by the related authority. For example, the general outcome of a public sector could be: accessible, reliable and safe public transport system, or a fair and independent criminal prosecution service. In the public service organizations, these general outcomes can then be translated into the agency-level outcomes. Furthermore, the use of outcome information in the public service organizations, can internally improve the budget setting process, while externally it can improve agency control, make it easier for other agencies to make contributions to the organization (Hundley, 1991).
In the next step, OBM leads the public sector organization to specify agency-level services that are required to achieve the agency-level outcomes. This is generally performed by the making of a service checklist. The service checklist consist of questions like what service are delivered, what outcome are the services addressing, what results are the service addressing.
Afterwards, the OBM approach takes the public service organization to developing performance indicators. For the public service organizations, cost efficiency indicators could be: cost per student graduated, cost per license issued, etc; productivity indicators include: students taught per teacher, cases resolved per officer, etc. Overall, the benefits brought by the new approach include:
- Greater public transparency
- Enhanced knowledge in identifying best practices
- Increased ability in assessing performance against target
- Increased ability in investigating reasons of failure in meeting specified targets
III.3.2. New Skills Required
In light of the elements and process demanded by the OBM approach, the new skills required are:
- Sensitivity to new Information
To better perform the first step of the OBM approach, which is defining goals and outcomes, members of the public service organization need to be sensitive of the demands exist in the surrounding environment. This is related to the fact that public sector organizations exist to serve the public rather than to achieve organizational profit.
- Communicating information
The people that are exposed to new information generally come from the lowest structure of the organization. Thus, the organization must design a system and furthermore, the skills to communicate information up to the highest level of management.
- Linking service activities to established goals
Under the OBM approach workers at the public service organization are demanded to constantly see the linkage between the goals, outcome defined agency-level outcome and finally the service performed. This will provide them with clear logical frame of thinking, especially in decision making activities.
‘Challenges and Trends in Public Administration’. 2008. Retrieved January 2008 from unpan1.un.org/intradoc/groups/ public/documents/ASPA/UNPAN006965.pdf
Disney, R., and Gosling, A. 1998, ‘Does it Pay to Work in the Public Sector?’, Fiscal Studies, 19(4), 347–74.
François, P. 2003, ‘Not-for-Profit Provision of Public Services’, The Economic Journal, 113(486), C53–61.
Glaeser, E. L. 2003. ‘The Governance of Not-for-profit Organizations’. Chicago, IL, University of ChicagoPress.
Hatry, H. P., Morley, E., Rossman, S. B.& Wholey, J. S. 2003. ‘How Federal Programs Use Outcome Information: Opportunities for Federal Managers’. National Academy of Public Administration
Hundley, G. 1991. ‘Public – and Private-sector Occupational Pay Structures’, Industrial Relations, 30(3), 417–34.