The Performance of Performance Standards

1 - Performance Standards and the Potential to Improve Government Performance

1 1 Performance Standards and the Potential to Improve Government Performance James J. Heckman Carolyn J. Heinrich Jeffrey Smith A number of recently implemented reforms to public sector incentive systems have sought to reorient them toward a focus on measuring results and inducing public agencies to become more efficient, responsive , and accountable to the public. They share at least two features. The first is a system of performance measures and standards designed to create clear expectations for government performance and to assess results. A second feature is a means for rewarding individuals, teams, or entire organizations for achievement relative to the established performance goals, primarily through budgetary allocations. By clearly defining goals and developing explicit rewards for their attainment, these systems have aimed to replicate, in a nonmarket setting, the incentive structures, competition, and resulting high performance and efficiency of private markets (Light 2005). Among its first steps in advancing these reforms, the Obama administration has required federal agencies to identify a limited number of high-priority performance goals for which performance trends will be tracked, and through its new Open Government initiative, it will make these data publicly available and promote the use of new methods in the analysis of them. The government is also now compelling the private sector to provide more information on its performance for transparency and accountability (beyond longer-standing areas of public scrutiny such as health care and the environment), and has devised incentives for cooperation and penalties for withholding information (Cukier 2010). For example, it is now possible for the public to get sta- 2 Heckman, Heinrich, and Smith tistics on job-related deaths that name employers and to see restaurants’ health inspection scores online. As the use of performance measurement and incentive systems has expanded in the public sector, so has the number of studies calling attention to their problems and unintended effects (Bevan and Hood 2006; Brooks 2000; Courty and Marschke 2004; Heckman and Smith 2004; Heinrich 2004, 2007; Heinrich and Marschke 2010; Koning and Heinrich 2010; Propper and Wilson 2003; Radin 2000; Smith 1995; General Accounting Office [GAO] 2002). Performance standards systems and bonuses are (or have been) used in Food Stamps (now the Supplemental Nutrition Assistance Program) and welfare-to-work programs, employment and training programs, public school accountability systems under No Child Left Behind, child welfare agencies and child support enforcement programs, Medicaid and SCHIP programs, and other social programs, although not without some degree of controversy and ongoing challenges in their design and implementation. The development of performance incentive systems in public bureaucracies also continues to advance in Europe, led by Great Britain’s early exploration, and with some governments (such as Australia and the Netherlands) now implementing incentive systems with fully (100 percent) performance-contingent pay/contracting arrangements (Finn 2008; Struyven and Steurs 2005). While the broad introduction of incentive systems in many government agencies is new, U.S. employment and training programs have used both performance standards and monetary bonuses for over two decades. Klerman (2005, p. 347) describes the Job Training Partnership Act (JTPA)/Workforce Investment Act (WIA) performance measurement system as one of the “most mature implementations of performance-based management.” It is also one of the most studied systems, in part because of the randomized experimental evaluation of the JTPA program that produced important information for assessing the performance of these performance standards systems in measuring program impacts (Bloom et al. 1993; Dickinson et al. 1988; Heckman, Heinrich, and Smith 2002; Heckman, LaLonde, and Smith 1999; Orr et al. 1995). Policymakers have looked to the results of these studies to guide changes to these systems in employment and training programs and to also inform the design and operation of performance standards systems in other government programs. Performance Standards and Improving Government Performance 3 At the same time, one of our motivations for assembling the research presented in this book is that despite decades of study and practice, some of the important lessons that have been learned are not reflected in the current design and implementation of performance standards systems . Bevan and Hood (2006), for example, describe the development and use of performance targets in the English public health care system, along with the perverse incentives they generated, as “hitting the target and missing the point.”1 And despite the long tenure of performance standards in U.S. employment and training programs, a 2002 GAO report (p. 14) confirms the persistence...