Financial Accountability & Management, 31(1), February 2015, 0267-4424

Performance Management
in the Public Sector: The Ultimate
Challenge

MICHELA ARNABOLDI, IRVINE LAPSLEY AND ILEANA STECCOLINI∗

Abstract: Performance Management is the challenge confronting public service

managers. However, the enduring research focus on performance measurement in
public services, without resolution, does not offer neat solutions to performance
management in public services. This drawback of measurement difficulties has not
abated interest in performance management. But there are significant adverse
outcomes associated with the clumsy use of performance management systems in
public services, particularly negative effects on staff morale. The lack of ready-made
answers to performance management makes this task complex and demanding for
public service managers. This paper identifies critical dimensions of effectiveness in
performance management systems.

Keywords: performance management, complexity, public services, employee im-

pacts, management challenges

INTRODUCTION

There are relentless pressures on managers in public services to act on the

quality of their services. The idea of ‘more with less’ has become a slogan,
as managers seek to maintain or improve the quality of service delivery. This
phenomenon is pervasive – an international trend from which there is no escape
for public service managers. This global interest has attracted the attention
of key world institutions such as the OECD (see Perrin, 2003; and Curristine,
2005, 2007 and 2008) on the fostering of performance budgeting and monitoring
systems) and the World Bank (see the Talbot, 2010, study of UK performance
management for the World Bank as the promulgation of best practice). And yet

∗
The Special Issue Editors are respectively from Politecnico di Milano; IPSAR, University of
Edinburgh Business School; and Bocconi School of Management.
Address for correspondence: Irvine Lapsley, IPSAR, University of Edinburgh Business
School, Edinburgh EH8 9JS.
e-mail: [email protected]


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Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA. 1
2 ARNABOLDI, LAPSLEY AND STECCOLINI

there is no single solution as the public sector has many variations in scope and
features in the 196 countries of the world, all shaped by economic performance,
political philosophy, the involvement of external agencies and demands for
public services (CIMA, 2011). These layers of complexity complicate, but do
not lessen the interest in, and need for, performance management systems in
public services.
The financial crisis of 2007–2008 is still unfolding and we do not yet know
its outcome. The fiscal pressures have intensified the need for making best use
of reduced resources in public services. This is in the midst of an uncertain
environment in which traditional paradigms for public policy have experienced
policy reverses (Coen and Roberts, 2012). However, the genesis of performance
management systems is the global impact of three decades of the new public
management (NPM) phenomenon which drives the focus on results oriented
public services. The global financial crisis has accentuated the longstanding
need for effective performance management of public services. There has been
considerable research activity on performance management systems across a
range of services to the extent that we may have a performance measurement
industry (Johnsen, 2005). Nevertheless, that research effort is diffuse and has
not been consolidated into a coherent body of thought (Broadbent and Guthrie,
2008). Indeed, the activity of performance management has been characterised
as risky for public service managers (Cuganesan et al., 2014).
This paper contributes to the debate on performance management by offering
a nuanced interpretation of the nature of this activity in public services. First,
this paper discusses how complexity in public services may be theorised. Then it
addresses the topic of performance management in public services by examining
three dimensions of processes and impacts: (1) The key pitfall of performance
management (2) Performance technologies: An accounting problematic and
(3) Performance management in a complex setting. The paper concludes with
closing comments on the challenges facing performance management in public
services and with a future research agenda.

THEORISING COMPLEXITY

The public sector is widely recognised as a complex setting for study. The public
sector has been described as an area of inherent complexity (Lapsley and Skærbæk,
2012), stemming from the location of managerial culture in a sector which
experiences many political influences. This, in turn, may confound managerial
discretion and complicate levels of accountability, especially in a sector which is
repeatedly reformed, with uncertain outcomes, and where expectations are high
on the delivery of social justice, social responsibility, equity in society, democratic
entitlements and pressures for social change.
So, the concept of complexity abounds in the public sector. But how can we
study this phenomenon for public services? There is now an increasing focus
on the idea of the development of complexity theory which has captured the


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imagination of many researchers in public policy settings. The early work of
Axelrod (1997) seeks to build a theory of complexity of cooperation based
on the classic case of the Prisoner’s Dilemma. In this work, Axelrod stresses
its difference from conventional inductive or deductive theorising, in which
he describes his work as a modelling to ‘aid intuition’ (Axelrod, 1997, p.4).
Fundamentally, the Axelrod approach is based on simulation and attempts to
study the actions and interactions of individual agents in society and then observe
patterns which occur at the total society level (Axelrod, 1997, p.3). In subsequent
work, Axelrod collaborated with a public policy specialist, Cohen, to address how
ideas of complexity could be harnessed by organisations (Axelrod and Cohen,
1999). They saw diversity of effort in the study of complexity, but also identified
recurring themes which informed their framework which they describe as a
unified view of complexity studies for the analysis of complexity in organisations
(Axelrod and Cohen, 1999, p.18). In this elaboration of their approach they made
the following observation (Axelrod and Cohen, 1999, p.19):

. . . complexity research does not make detailed predictions. Rather it is a framework

that suggests new kinds of questions and possible actions.

The complexity theory framework as elaborated by Axelrod and Cohen (1999,

passim) had the following elements:
1. Complex adaptive systems
2. Co-evolution (and self organisation?)
3. Dynamic systems
4. Non-linear relationships
5. Emergent properties
6. Edge of chaos (and strange attractors?).
The concepts in italics refer to common elements in contemporary complexity
theory which were not explicitly mentioned by Axelrod and Cohen (1999). The
complex adaptive systems are those in which agents and or populations actively seek
to make adaptations (Axelrod and Cohen, 1999, p.7). This is a building block in
their analysis. The idea of co-evolution is the way in which the actions of some
change agents may spill over and affect the practices of other agents. This is
a process which may never settle down (Axelrod and Cohen, 1999, p.8). The
related concept of self organisation refers to the manner in which agents within
organisations can shape the nature of the organisation by their actions and
interactions. While this concept was not explicitly included in the Axelrod and
Cohen framework, it is entirely consistent with their elaboration of dynamic
agents in systems. The dynamic systems feature of complexity often arises because
of the varieties of agents at work in organisations and in total systems (Axelrod
and Cohen, op.cit., p.32). The non-linearity of systems means that small actions


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can lead to disproportionate larger differences in subsequent actions (Axelrod

and Cohen, op.cit., p.36). The idea of emergent properties is that systems may
exhibit traits which are distinct to the system and which are not a characteristic
of the individual parts of the system (Axelrod and Cohen, op.cit., p.15). The
idea of the edge of chaos refers to interactions between organisations and their
environment, which exist in a delicate balance between order and chaos. This
phenomenon occurs as evolutionary systems structure interaction patterns to
achieve a balance between exploration and exploitation (Axelrod and Cohen,
op.cit., p.72). A related idea which features in current thinking on complexity
theory is the strange attractor. This idea is often attributed to the work of Lorenz
(1995). In complex systems the initial starting conditions can influence the
dynamics of interactions, but as systems evolve they may be attracted to other
properties (or attractors). The strange attractor is particularly complex: chaos
may be present, but strange non-chaotic properties may also coexist at the same
time and point.
This set of concepts in complexity theory underlines its systemic approach
to the study of phenomena. This approach to the study of complexity is an
endeavour to take a holistic look, not only at the system dynamics, but also at
the constituent parts of systems. This systems thinking is a distinctive feature
of modern complexity theory. While this theorising originated in the natural
sciences and has been used in, for example, forecasting weather patterns, there
is a movement recommending its use in the social sciences. This use includes
public administration (Klijn, 2008), public management (Teisman et al., 2009;
and Rhodes et al., 2011) and public policy (Geyer and Rihani, 2010; Room, 2011;
and Haynes, 2012).
While there are advocates of the merits of complexity theory in the
investigation of the management of public services (Lin and Lee, 2011),
reservations can be expressed over its mobilisation in this study setting. In the
first instance, this thinking originated in the natural sciences and there remain
questions over the applicability of models derived from natural to social sciences.
The translation of ideas from different disciplines introduces the likelihood of
misrepresentation or misinterpretation or ambiguity. This seems particularly
likely with a theory which introduces concepts with names like edge of chaos,
strange attractors, co-evolution, all of which look particularly susceptible to
managerial capture and reinterpretation. Another dimension of this is whether
there is indeed a unified theory of complexity theory. Klijn (2008) identified
complexity theory as a collection of different theories: complex adaptive systems;
dissipative structures; autopoiesis theory; chaos theory; path dependencies.
However, Klijn did acknowledge the commonalities of systems thinking and
non-linearity. The significance of Klijn’s observations is that they intensify the
potential for misrepresentation or misinterpretation of complexity theory. The
Klijn critique has attracted observations that the underlying model of complexity
theory offers a theory which needs to be tested empirically and which does not
lend itself to such testing (Pollitt, 2009). There are proponents of complexity


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theory who see the idea of self organisation as a basis for enhanced democracy
in public organisations (Blackman, 2001), but this does not sit well with the
realpolitik of centralised control and a results focus in many governmental
settings. There is also concern over the tensions between complexity theory and
the need for evidence-based policy to inform policy making in public services
(Parsons, 2002). More importantly, there is a deterministic tendency within
systems thinking which does not sit well with the highly influential view of
postmodernism, which emphasises social construction, the frailty of causality,
the importance of power relationships, stresses the relational and interpretive
nature of human activity, the proliferation of the contested nature of knowledge
and ideas (see Best and Kellner, 1991, passim).
Therefore, the application of complexity theory is not so self-evident or
straightforward as it might appear. While complexity theory has not been
advocated specifically to examine performance management in public services, it
has been recommended for the study of the closely related phenomenon of NPM
(Lin and Lee, 2011). This is an important area of research which we mobilise to
test it out below in the challenges facing performance management in a complex
public service setting and which we reflect on in our conclusion.

THE KEY PITFALL OF PERFORMANCE MANAGEMENT

The single largest pitfall for performance management systems in public service
organisations is a negative side-effect which undermines the motivation, morale
and behaviour of human resources. The key resource in many public services
is their human capital – the staff employed, their expertise, their capacity
for problem solving and policy implementation. There are distinct, adverse
outcomes for the human dimension of performance management. This paper
examines research on this facet of performance management, which traces
human resource issues arising from its implementation. The most trenchant
critique of the adverse impact of NPM on public service staff is made by
Diefenbach (2009). Diefenbach (2009, p.905) made the following observation:
NPM’s impact on employees and corporate culture of public sector organisations
comprises a whole range of negative psycho-sociological and organisational effects,
such as: increase in occupational stress, illness, low morale, decline in job satisfaction
and motivation, alienation, fear, resentment, the distorting intellectual effects of
writing for audit, a competitive, adversarial and punitive ethos, as well as wasteful,
stressful, over- bureaucratic, and expensive audit procedures, increased tensions, more
distrust between people, forms of symbolic violence and institutional bullying, a
rougher working climate, an invisible net of managerial power and domination.

There is a body of literature which supports this critique of NPM impacts on

employees. The primacy accorded to audit in the NPM world has led to Power’s
famous observation that we now live in an audit society (1997) in which the
need to respond to audit controls, procedures and practices can shape the day-
to-day life of organisations. This has the deleterious consequences of additional


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work and the subsequent displacement of the primary purpose of organisations

so affected. In this NPM world, organisations grapple with the bureaucracy of
the audit society, in which boxes must be ticked to demonstrate compliance
with diktats whether this compliance is for real or merely legitimating activity
(Arnaboldi and Lapsley, 2008; and Lapsley, 2009). The roles and expectations of
performance auditors continue to grow (Funnell, 2015).
Within a variety of public services there is evidence of the adverse impact
of NPM reforms on employee welfare. One such service is policing where new
managerialism has increased workload and pressure on officers (Butterfield
et al., 2004, p.176). This has led to a significant majority of UK police officers
reporting stress and overwork (UNISON, 2014). The corporate language of
mission, commitment and strategy in public services is claimed to sit uneasily
with, and promote disillusion in, public services which experience cost reductions
with increased job insecurity, larger class sizes, fewer nurses (Hoggett, 1996).
In health and social services, NPM reforms have resulted in increased intensity
of work practices, with fewer staff, increasing levels of stress, demoralised staff,
high absenteeism and labour turnover (Kirkpatrick et al., 2005, p.98, p.120).
Although Kirkpatrick et al. (2005, p.150) do report that workers within social
housing have more readily embraced the managerialism (its language, its logic)
of NPM.
Within universities, the advent of NPM has resulted in a more adversarial
working environment (Newton, 2003, p.434) in which tolerance for independent
thinking by academics and collegiality is marginalised by management agendas
(Saunders, 2006). The NPM focus on quantification and results has spawned
a wide range of metrics within universities including measures of quality
(Pettersen, 2015). It has been suggested that these are mobilised to manage and
control academics (Burrows, 2012). These metrics include citations, workload
models, research assessments, teaching quality assessments and league tables
for university activities and performances, including commercial activities. Gill
(2010, p.228) has observed that the impact of this managerial regime has had
wide ranging adverse effects:

Many academics are exhausted, stressed, overloaded, suffering from insomnia, feeling
anxious, experiencing feelings of shame, aggression, guilt, hurt and ‘out of placeness’.

It has been suggested that this state of affairs is widespread in universities as part
of a ‘deep, affective somatic crisis which threatens to overwhelm us’ (Burrows,
2012, p.355). It has been observed that the strength of this phenomenon
is such that academics have been unable to challenge a universal focus on
calculative practice and audit culture in universities stemming from NPM
practices (Shore, 2008). This primacy accorded to performance management
systems is attributed to NPM thinking, in which managerial elites have a vested
interest in legitimising an audit culture focussed on constant assessment at the
expense of collegiality and scholarship (Craig et al., 2014).


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The above observations demonstrate the potential negative outcomes when
public organisations implement clumsy performance management systems
which are not geared to the key human actors engaged in the delivery of services.
On balance it should be noted that the policy design and implementation
intensity of NPM varies between countries, and that much of the literature
and research is scarce when it comes to studies of net effects of NPM reforms
including performance management (Bouckaert and Halligan, 2008; van Helden,
Johnsen and Vakkuri, 2012; and Pollitt and Bouckaert, 2011). Next we comment
on the range and quality of tools available to public service managers.

TECHNOLOGIES OF PERFORMANCE MANAGEMENT: AN ACCOUNTING

PROBLEMATIC

For the managers there are significant problems in the selection of management
tools to mobilise in the name of performance management (see, for example,
Hope and Player, 2012). The quality of available techniques is a particular
problem for public service managers. There have been various attempts at
devising models of performance management. These include the idea of a
global measure of performance. The failure to achieve this and the difficulties
of operationalising the resultant partial performance indicators are discussed
below. The classic Anglo-American NPM approach of seeking appropriate private
sector models has led to the introduction of Benchmarking, the Balanced
Scorecard and Lean Management into many public services, with mixed results.
These initiatives resonate with the classic phenomenon of following the latest
managerial fads and fashions (Abrahamson, 1996). The early attempted solution
of managerial checklists as a reductionist treatment of complexity is revived
here and considered as a potential way forward for public services. The range of
commonly used tools in public services performance management is set out in
Table 1. We identify five such possibilities for public service managers and as
Table 1 shows there is no obvious choice from the set of available technologies.
Each of these approaches to performance management is discussed, next.

Budgetary Control as a Performance Tool

The first technology identified in Table 1 is budgeting. This inclusion is
recognition of the significance of the accounting function within public service
organisations. It is also recognition of the longstanding centrality of the
budgetary process in public sector organisations (Henley et al., 1992, p.56).
However, while tradition, the size of public sector organisations and the level of
sophistication in financial management may lead public service organisations
to rely on budgets for performance control, this option has many disadvantages.
This technology ignores non-financial performance indicators and can therefore
be seen as very narrowly focussed on financials. In this way, the budget can
be seen as offering crude cost control. However, the reluctance to refine the


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Table 1
Performance Management Technologies

Technology Key Attributes Comment

1. Budgetary Control Traditional Accounting Crude, limited

2. KPIs & Benchmarking Partial performance What gets measured gets
indicators in included
comparable settings
3. Balanced Scorecard The Harvard model of Identifies multiple
performance dimensions but is over
management specified
4. Lean Management The Toyota Production Negative side effects
model
5. Managerial Checklists An exercise in Susceptible to box ticking
reductionism legitimation

historical budget setting practices of public sector organisations by adopting

activity-based measures undermines the rigour of budgets. Furthermore, the
achievement of budgetary equilibrium may be seen as a kind of success, but it
is limited. The achievement of balancing the books does not equate to meeting
all service demands nor does it mean the organisation has operated efficiently.
However, the downside of all this is that whatever performance management
system is implemented within any public sector organisation, it will have to
relate to the budget system given its centrality in the life of the public sector
organisation, a facet of performance management which is often overlooked
and is neither simple nor straightforward.

Private Sector Technologies for Performance Management

The next three technologies in Table 1 all fit the ‘fads and fashions’
(Abrahamson, 1995) idea of management diffusion. All of them have private
sector origins: Benchmarking came from Rank Xerox (Cross and Iqbal, 1995);
the Balanced Scorecard came from Analog Devices, an electronics company
(Schneiderman, undated); and Lean Management came from Toyota, the
Japanese car manufacturer (Womack et al., 1990). The practice of looking to
the private sector for management ideas is a fundamental element of NPM.
The appropriateness of this practice is contestable, given the difficulties of
translation from the private to the public sector. In the following sections each
of these private sector imports is discussed and then we revisit the idea of
managerial checklists.
In this paper we link Key Performance Indicators (KPIs) and Benchmarking
as technologies of a similar vintage, which are used in concert. They can both
be seen as technologies which have emerged in response to the lack of the


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commercial bottom line for performance assessment in public services. Efforts to
mobilise value for money or the 3Es of economy, efficiency and effectiveness as a
bottom line have failed to deliver a global model of performance measurement
(see, for example, National Audit Office, 1988; FEE, undated; and Mayston,
1985). Efforts to devise a public sector bottom line have degenerated into
the generation of many partial performance indicators (Lapsley and Pong,
2000). The relationship of these partial indicators is not self-evident in many
cases, without a hierarchy of performance indicators which form an articulate
statement of performance. The decision to identify KPIs for performance
assessment focuses on what can be measured rather than necessarily capturing
key dimensions of organisational performance (Bevan and Hood, 2006). The
forced nature of this selection process and the arbitrary manner of choices made
is captured by the following statement by an elected member of a legislative
assembly (cited in Ezzamel et al., 2007):
We are fabulous at firing arrows at walls, drawing targets around them and then
saying it was a brilliant shot.

The shift from organisations devising their own KPIs to a benchmarking

arrangement in which comparable organisations are identified in which
performance information is exchanged creates further complexity. While public
service organisations are not in competition and therefore open, in principle,
to sharing performance information, there have been difficulties from the
beginning in identifying appropriate comparators, focussing on performance and
embracing the concept of benchmarking (Bowerman et al., 2000; and Bowerman
et al., 2001). This concept of the contested field in which actors’ own interests
prevail over a common or shared purpose remains a major obstacle to effective
benchmarking (Siverbo, 2014).
The Balanced Scorecard has achieved widespread interest in the public sector
in the last decade of the 20th century and the first decade of the 21st century.
This technology was claimed to be first devised in the electronics firm, Analog
Devices, by Schneiderman (Schneiderman, undated) and subsequently developed
by Kaplan and Norton (1992 and 1993). The attraction of this technology was
its focus which was broader than narrow financials by including consideration
of financials, internal processes, customers and learning. This configuration
appeared to offer a comprehensive basis for linking corporate financial planning
and strategic planning, unlike the proliferation of partial and so called key
performance indicators. However, this particular management fashion has
started to encounter considerable criticism. Notably, the Balanced Scorecard has
been criticised because its four dimensions understate the complexity of many
organisations (especially in public services) and it offers little more than lists
of metrics (Norreklit, 2000). Also it has been argued that the key dimensions
in the Balanced Scorecard are not as tightly coupled as they appear in the
writings of Kaplan and Norton (Modell, 2004). A scrutiny of 20 years of research
studies of Balanced Scorecard systems reveals implementation difficulties with


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little integration with accounting information systems (Hoque, 2014). While

the Balanced Scorecard has had immense popular appeal, it looks like this
management fad is now, or may be becoming, out of fashion.
Lean Management, however, has become the choice of performance
management technology of many public services. This is somewhat surprising
as Lean Management is an earlier technology than both Benchmarking and the
Balanced Scorecard as it was developed by Toyota in the 1960s (Womack et al.,
1990) as the Toyota Performance System (TPS). Within the UK the pressure
of ‘more with less’ has led to widespread attempts at Lean Management in
universities, hospitals and health care, and local government. At the centre of
the TPS are the concepts of the standardisation of work into repeatable processes
and the elimination of unnecessary stages in the production process to eliminate
waste and reduce costs in a process of continuous improvement. A report
commissioned by the Scottish Government argued that Lean Management was
applicable to the public sector (Radnor et al., 2006). Government ministers
have identified the potential of Lean Thinking in reducing public sector waste
(Murden, 2006). Universities UK (2011, p.37) has acknowledged what it regards
as the successful use of Lean Management in universities and advocates its
wider use. Health care has been at the forefront as a suitable case for Lean
Management. It has been argued that there is no lack of resources in health care
and the core issue is the uniform application of best practices to reduce costs and
increase quality. The TPS is ideal for this purpose and the UK NHS Institute
for Innovation and Improvement has developed guidance on Lean Thinking for
health care managers (NHS Institute for Innovation and Improvement, 2013).
However, the rapid spread of Lean Management has been questioned on
a number of levels. There have been reservations about the efficacy of Lean
Management at Toyota. In particular, concerns have been expressed that the
constant focus on cost reduction has affected the safety of their vehicles. On
February 3, 2010, Chris Lastrella, an off duty Highway Policeman in California
was driving his Toyota Lexus with his family on board when the accelerator
pedal jammed (Frean and Lee, 2010). All of the car occupants were killed in
the ensuing crash. There were a further 30 reported deaths in the US from
sudden unintended acceleration on Toyota vehicles at this time (Frean and
Lewis, 2010). At a subsequent hearing of the US Congressional Oversight and
Government Reform Committee, Roy LaHood, the US Transport Secretary said
Toyota was ‘safety deaf’ and Akio Toyoda, the grandson of the Toyota company
founder apologised for the accidents (Frean and Lewis, 2010). However, a senior
US executive challenged Toyota’s handling of safety issues as it expanded its
operations (Lewis, 2010). These outcomes undermine the application of Lean
Thinking as a relentless driver for cost reduction without due consideration for
other important issues such as safety.
There are other concerns over the application of Lean Management in public
services. There are issues over the portability of lean – how many public
services are like car factories? Also many public services exhibit high levels


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of interdependence in service delivery which may confound the standardisation
of public services. By focussing on segments of public service organisations, local
star optima may be devised which do not yield overall improvement. There is
evidence of a high failure rate for Lean Management in the National Health
Service (NHS) which may be attributed to the lack of supportive information
systems at project level, inter-unit level and organisational level (Kinder and
Burgoyne, 2013). More fundamentally, it has been suggested that the Lean
Management approach adopted within the UK public sector is doomed to failure,
in theory and practice, given its piecemeal application without an overarching
service model to inform its adoption and design (Radnor and Osborne, 2013).

Managerial Checklists
The final strand of performance technologies which we discuss here, is the
use of managerial checklists. At one level this might be seen as a relatively
unsophisticated management tool. For example, an early attempt at devising a
managerial checklist for performance management was Jackson (1988). Jackson
introduced nine key concepts for managers to manage performance. Some of
these are beyond criticism (consistency, comparability, clarity, controllability)
but others are in contradiction (comprehensive versus bounded). While this
contribution is well intended it lacks precision, is not readily operational and,
most importantly, it looks susceptible to the tick box mentality of the Audit
Society (Power, 1997).
A more promising offering is the managerial checklist from Likierman (1993).
This is a somewhat neglected study. Likierman’s work is based on a three year
research project in which 500 middle and senior public services managers were
interviewed. All of those interviewed were managers who used performance
indicators. This paper looks at performance from multiple dimensions, looking
at the trajectory of performance systems through the concepts underpinning
the system, the preparation of the system, the implementation and the use of
performance information. This study was not fully exploited as its completion
coincided with the author becoming a senior member of the UK Government
Civil Service. However, this study offers a potential way forward. It points to the
need for evidence based studies rather than the fragmented policy of snatching
at the latest management fashion as the solution to performance management.

PERFORMANCE MANAGEMENT IN A COMPLEX SETTING

The complex setting analysed in this paper is the UK NHS. The NHS has
an immense workforce of many different health care professionals and sits
firmly within those public services which have human capital as a key resource,
as outlined in the third section of this paper. In terms of technologies of
performance management, budgetary control remains a central mechanism for
the NHS. There has been some limited use of the Balanced Scorecard in the


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NHS, but there has been more sustained use of KPIs and benchmarking and
for the past few years there has been a strong use of Lean Management. In
terms of the NHS as a study setting, Lapsley and Schofield (2009) highlight the
complexity of the UK’s NHS, which makes it of particular interest for public
service performance management. This includes the distinctive origins and ethos
of the NHS and their financial implications. The density of NHS organisation
and the scope of the services which it delivers, also present difficult challenges
for financial planning and control. The sheer scale of NHS operations, with
it often being considered one of, if not the, largest organisation in the world,
presents significant challenges for financial accountability and control. There is
also the fundamental issue of the efficacy of a national health care system funded
from general taxation. These general contextual issues heighten the complexity
of the NHS but other factors at work impinge directly on NHS performance
management, as Lapsley and Schofield (op.cit., p.367) express it:

Furthermore, and particularly in times of financial restraint, the existence or otherwise

of formal or informal rationing systems in health care presents significant ethical
and financial dilemmas. Most importantly, the enhanced visibility and significance of
accounting numbers and performance measures in NHS management processes and
accountability mechanisms over the course of its life continues to attract the attention
of researchers.

This is the context which we use to illustrate the challenges confronting

performance management in public services. It is interesting to note that a
number of complexity theory advocates have identified health care as a suitable
context for study (Arndt and Bigelow, 2000; Geyer and Rihani, 2010; and Rhodes
et al., 2011) and performance management in health care is as complex and
elusive as ever (Chang, 2015; and Kelly et al., 2015).
It was noted above that in many public services, what can get measured gets
counted (Bevan and Hood, 2006) and this can form the basis of performance
management systems and this is the case with the NHS. The key performance
measure in recent years has been the use of waiting lists for patients in need
of health care treatment. Successive governments have set targets for achieving
reductions in waiting lists. The waiting list is a capacity utilisation indicator,
which may appear sensible in a service which is free at the point of use and for
which there is an excess demand in the absence of a pricing system. However,
there is a longstanding critique of waiting list indicators as soft performance
targets which are easy to manipulate. In his critique, Williams (1985) raised
questions over the criteria by which patients are admitted to lists, the uniformity
of such criteria across the NHS, the frequency with which they are updated, the
discretion in the alteration and admission of patients in targets.
In this section of this paper we examine the experiences of two health care
organisations in the NHS: (1) Lothian Health, and (2) Mid Staffordshire NHS
Foundation Trust. The experiences of these health care bodies resonate with
the Diefenbach (2009) critique of NPM type performance management systems.


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 PERFORMANCE MANAGEMENT IN THE PUBLIC SECTOR 13

(1) Lothian Health

In the National Health Service in Scotland, Health Boards have targets that
specify that 90% of their patients must be treated within 18 weeks of referral by
their general practitioner. At Lothian Health, there was a major inquiry initiated
by the Cabinet Secretary for Health over claims in the press from a whistleblower
that Lothian Health was routinely manipulating its waiting list numbers. This
report was prepared by PWC for the Scottish Government (Scottish Government
Directorate, 2012). Its findings confirmed the systematic manipulation of waiting
list information. As a public entity the governance mechanisms at Lothian
Health included both a management and a board (with lay persons appointed
by the Cabinet Secretary) to oversee its activities. The Board also had a Finance
and Performance Review Committee (FPRC) drawn from its membership, which
reported to the board. Within the management team there was an Executive
Management Team (EMT) at the highest level, which reported to the Board
and this top management tier had a Senior Management Team which reported
to EMT. Beneath the Senior Management Group there are the departments
and hospital specialties. Each month a Performance Management Report was
prepared by NHS Lothian as a standard agenda item for all four parts of Lothian
Health governance structure as outlined above. The PWC report stated (op.cit.,
p.17) that:

The EMT, the Board and the FPRC were not presented with a comprehensive picture
of waiting time management or data, for example, as there is an absence of any detail
on periods of unavailability data or full waiting list size. In addition there is no trend
analysis of performance.

The absence of this information hindered the EMT and the FPRC in making
informed decisions on waiting list issues and the Board may not have been able
to identify that there was an issue (op.cit., p.17).
The lack of information presented to the top was based on routine manip-
ulation of waiting list figures. The PWC investigation (Scottish Government
Directorate, 2012, p.5) highlighted this:

. . . highlighted excessive and inappropriate use (and apparent misuse) of periods

of patient unavailability, in particular retrospective creations and changes, which
removed patients from waiting times breach (i.e., missing target) reports. This
inappropriate use has masked the number of breaches (failures to meet targets)
reported at a number of month ends and has resulted in certain patient journeys
being longer than have been formally reported.

These inappropriate adjustments involved offering patients treatment in

England at short notice and if they refused they were removed from waiting lists.
There was also lots of retrospective alteration, manually, of patient records. For
example, this report (Scottish Government Directorate, 2012, p.6) identified
examples of this:


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14 ARNABOLDI, LAPSLEY AND STECCOLINI

On 30 May, 2011 (just before breach or target failure reporting) a member of staff
made 124 amendments to periods of unavailability, retrospectively, and then on
1 July, 2011 (just before target failure reporting) another member of staff made
154 amendments to periods of unavailability, retrospectively, between 0800am and
0900am.

It is also noteworthy that many managers in Lothian Health received detailed

waiting list information from weekly waiting time position reports but this infor-
mation was not included in formal reports to the EMT, the FPRC or the Board.
How did this happen? Interestingly, given the Diefenbach (2009) critique of
bullying resonates with other findings in this report. It observed that many
of these staff members were put under unacceptable pressure to manipulate
waiting list figures in a culture of ‘no bad news’ about waiting list figures
(Scottish Government Health Directorate, 2012, p.21).
However, senior figures within Lothian responded strongly to these sugges-
tions (Lothian Health, 2012):

Bullying and harassment have never been tolerated in NHS Lothian and we will be
following up immediately any claims of this through our own internal inquiry, which
is already far advanced (Chief Executive),

and:

We do not tolerate any form of bullying and harassment and this is monitored by
annual surveys. This is a message sent out to all employees when they join us and
any time such behaviour is proven we are robust in tackling it (Director of Human
Resources).

However, despite such protestations, the Cabinet Secretary for Health initiated
a further report into the management culture at Lothian. This report confirmed
a bullying management culture at Lothian which manifested itself in an extreme
form around the performance management of waiting list targets (D.J. Bowles
and Associates, 2012). In this report there are comments by members of staff
which illustrate the nature of this bullying culture (D.J. Bowles and Associates,
op. cit., p.19, p.23):

Some senior managers bully us with constant targets, targets, targets . . . shouting and
relentless pressure.

A macho culture that has lasted for some time.

Shocking . . . an atmosphere of fear.

There is a blame culture, particularly for senior managers and I see it cascade and
leak out to the lower graded staff.

If you don’t reach your targets, you can collect your P45 (i.e., lose your job).

Those of you with mortgages and career aspirations had better be afraid.


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 PERFORMANCE MANAGEMENT IN THE PUBLIC SECTOR 15

The report by Bowles and Associates (op.cit.) described this as a dominant

culture (p.21) in which the general leadership and management style is based
on ‘command and control’ (p.19) in which there is an almost total concentration
on targets and the tasks required to achieve them (p.19) and in which there is
an ‘emphasis on targets and predominantly autocratic leadership’. This report
also observed that the ‘obsessive focus’ on targets for performance management
meant that the organisation had lost sight of policy objectives (op.cit., p.36).
Despite these reports, Lothian Health has just reported yet more difficulties
over waiting list targets (Pickles, 2014). Indeed, Lothian Health has longstanding
difficulties over the achievement of waiting list targets for many years. There
are distinct circumstances which accentuate this problem. There are the general
issues of a system which is stretched by no pricing or rationing systems. There
are the increasing numbers of elderly patients with multiple medical conditions.
Perhaps most importantly Lothian Health is a regional centre of excellence
with world leading medical specialists which always seem to attract more
referrals than they can handle. The major issue here is the way complex systems
are reduced to simple performance systems with all manner of deleterious
consequences, particularly for staff implementing them.

(2) Mid Staffordshire NHS Foundation Trust

There have been two major, highly critical reports published on Mid Stafford-
shire NHS Foundation Trust, the report of an Independent Inquiry (Francis,
2010) and the report of a public inquiry (Francis, 2013). These follow other
critical reports by oversight bodies in health care. The initial concerns over
the management and quality of care at Mid Staffordshire were aroused by
mortality rates which were significantly worse than at other hospitals (Health
Care Commission, 2009), which observed (p.137):

In this report, we have drawn together the different strands of numerous, wide-ranging
and serious findings about the trust which, when brought together, we consider amount
to significant failings in the provision of emergency healthcare and in the leadership
and management of the trust.

Concerns expressed by patients and patients’ families led to the Secretary of

State for Health establishing the first Independent Inquiry (Francis, 2010). A
subsequent Secretary of State for Health commissioned a second, public inquiry
to be led by Robert Francis (Francis, 2013). In addition to the concerns over
mortality rates, these reports were extremely critical of the poor quality of
patient care. The following instances (Francis, 2013, para 23, p.13) illustrate the
woeful standards of patient care:
1. Patients were left in excrement in soiled bed clothes for lengthy periods.
2. Assistance was not provided with feeding for patients who could not eat
without help.


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16 ARNABOLDI, LAPSLEY AND STECCOLINI

3. Water was left out of reach.

4. In spite of persistent requests for help, patients were not assisted in
their toileting.
5. Wards and toilet facilities were left in a filthy condition.
6. Privacy and dignity, even in death, were denied.
7. Triage in A&E was undertaken by untrained staff.
8. Staff treated patients and those close to them with what appeared to be
callous indifference.
How did an NHS hospital ever sink to such low standards of care? The Francis
Reports (2010 and 2013) identify a culture in which the needs of patients were, at
best marginalised, and in which the management of this hospital gave primacy to
performance targets and to good news stories. The following extract illustrates
this point (Francis, 2013, p.43):
Those with the most clear and close responsibility for ensuring that a safe and
good standard of care was provided to patients in Stafford, namely the Board and
other leaders in the Trust, failed to appreciate the enormity of what was happening,
reacted too slowly, if at all, to some matters of concern of which they were aware,
and downplayed the significance of others. In the first report, this was attributed in
large part to an engrained culture of tolerance of poor standards, a focus on finance
and targets, denial of concerns, and isolation from practice, elsewhere. Nothing I have
heard in this Inquiry (i.e., the Public Inquiry) suggests that this analysis was wrong.
Indeed the evidence (from the Public Inquiry) has only reinforced it.

The above critique of the negative impact of performance management on the

central mission of this hospital trust is accentuated by its ‘good news’ culture
which sought to negate or play down setbacks and celebrate whatever minor
successes were experienced. A further extract from the Francis Report (2013,
p.44) underlines the insensitivity of management in its handling of challenges:
The Trust culture was one of self promotion rather than critical analysis and openness.
This can be seen from the way the Trust approached its Foundation Trust application,
its approach to high Hospital Standardised Mortality Rates and its inaccurate self
declaration of its own performance. It took false assurance from good news, and yet
tolerated or sought to explain away bad news.

Despite the management preoccupation with financial matters to the exclu-

sion of standards of patient care, this hospital trust managed to survive numerous
reports from a variety of oversight bodies (Francis, 2013, pp.48–64), which chall-
enged its fundamental practices of health care. Yet this hospital trust managed
to stagger on like a zombie organisation, still focussing on its performance
targets, before it was closed. This adverse impact of performance management
systems goes beyond the Diefenbach (2009) critique which identifies adverse
impacts on staff rather than the totality of the organisation and those it has
a duty of care for. It could be discussed whether the adverse effects were


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 PERFORMANCE MANAGEMENT IN THE PUBLIC SECTOR 17
the results of a flawed performance management system designed and used
too much for financial matters and too little for performance, an incompetent
management, a dysfunctional organisational culture, or a combination of all
these issues. Using the lenses of complexity theory one could describe this case
as a complex adaptive system organising itself top-down into a system with
emerging properties crossing the edge of chaos. In effect, the Mid Staffordshire
NHS Foundation Trust may have had too little performance management rather
than too much.
The initial starting point in this section was the implicit reference by Lapsley
and Schofield (2009) to health care as a complex adaptive system. Rhodes
et al. (2011, p.112) deploy complexity theory to demonstrate how health care
information systems can be modelled as a complex adaptive system. Also,
Geyer and Rihani (2010, pp.101–3) see the above kinds of adverse outcomes
as an inevitable consequence of policy makers viewing the complex NHS as a
mechanistic system which can be controlled from the centre. This approach fails
to recognise the modernisers proposing cycled and recycled reforms through
a single attractor, which limits the organisation in self organisation and
co-evolution.

CONCLUSION

There is a clear need for effective performance management systems in public

services. The NPM modernisers see this as a way of providing public services
more efficiently. The era of austerity has reinforced the need for more effective
management of performance. Yet, despite the very significant efforts by key
actors within public services and by related agencies and experts, there is no
unanimity on what constitutes best practice. Indeed, this paper has documented
significant failures of existing practices when managers become so obsessed with
managerial targets and appearance that they lose sight of the more fundamental
issues of organisational mission and performance. This paper suggests that the
underlying dimension which makes performance management so difficult is
the sheer complexity of, and the often over-simplistic approach to performance
management in the public sector.
This paper has elaborated upon the potential of complexity theory to be
mobilised by researchers within public services management to address the
nature of public sector complexity and its impact on performance manage-
ment.This conclusion is not without caveats as the origins, aims and expectations
of complexity theorists may differ from the realities of policy making in everyday
life. However, this perspective offers a definite research agenda for empirical
studies of performance management practice, as set out below:

1. For performance management to be effective it must mitigate or

eliminate the negative side effects on the key resource of human capital.
There is scope for exploratory research in study settings where successful


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18 ARNABOLDI, LAPSLEY AND STECCOLINI

performance managements appear to operate to determine where and

how this advance might be made.
2. Much of the extant literature on performance management tools and
technologies seems to be based on specific applications of particular
practices. There is much to be gained from closely grained case studies
of practice. But it would be interesting to see studies which undertook
a more holistic evaluation of performance management by paying
attention to the details and instability of systems. Such investigation
potentially opens the way for developing a new, specific, framework for
examining performance management in the public sector.
3. In their writing, Axelrod and Cohen (1999) refer to complexity theory
as an aid to thinking. It would be interesting to see if managers of public
services can relate to and make sense of the ideas in complexity theory
in their everyday tasks. There is scope for experimental work in this
area.
4. Within an era of rapid technological development the role of social media
which gives free access to global web communication to every individual
thereby opening opportunities and risks for the public sector. The role of
social media in enlisting, enrolling and mobilising different perspectives
on how public services are delivered and performance managed offers a
fruitful area of research.
5. There is a longstanding issue within public services of remuneration,
reward and incentives for exceptional performance. This is an important
element of performance management and needs careful evaluation in
work on public services.
6. Within many public services there are many short-term pressures to
deliver. There is scope for the receptivity and feasibility of longer
planning horizons in future performance management modelling.
7. Within performance management in public services there is silence on
‘management’ – what it is and what it means. This paper suggests that
performance management in public services is more complex than in
other settings such as non-profit or private sector activities. Yet there
is a presumption within existing literature that the ‘effective public
manager’ exists and will deliver. This is a key part of performance
management which merits careful research and analysis.

In addition to the above agenda focussed on performance management

practices, there is scope for further theoretical research in this area. In particular
we suggest the following issues:

1. Complexity theory builds on the idea of agents within systems who

detect the need for change and cluster to make change happen. Within


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 PERFORMANCE MANAGEMENT IN THE PUBLIC SECTOR 19
this thinking the idea of the agent appears to presume homogeneity.
Research on the manner in which agents act in complex adaptive systems
merits careful evaluation.
2. The raison d`etre of complex adaptive systems in complexity theory
is an aversion to what is perceived as a mechanistic concept of how
organisations function. However, the top down, command and control
model reflects the need to deliver successful policy outcomes. It may be
argued that this does not achieve its objective. But the self organisation,
bottom up thinking in complexity theory needs to be reconciled with
realpolitik for policy makers to endorse its use.
3. There are strands of complexity theory which resonate with other ideas
within the social sciences which have been used widely in the public
sphere. This includes the idea of the street level bureaucrat which
mirrors the purposeful agents depicted in complexity theory. Another
example is isomorphism which has parallels with ideas of co-evolution.
The idea of unintended consequences features too. There is scope for
the study of this phenomenon to see if a melding of different approaches
may be feasible.
This paper suggests that performance management is a big challenge facing
public services. It is the intention of this paper not only to encourage a rethink
of existing practices to avoid the negative side effects documented in this paper,
but to encourage researchers to undertake more nuanced research in this most
difficult, complex, testing area for researchers and practitioners alike.

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