Why public sector organisations must redefine their KPI’s

Public sector organisations are increasingly under pressure. Due to demographic ageing, increasing customer demands for personalised services and growing sustainability challenges, governments are likely to meet expenditure gaps and shortfalls over the next dozen years to be able to continue to deliver services at current levels to future populations. Developing new metrics for success is therefore a major concern. But how can it be tackled and accomplished?

One of the biggest strategic issues challenging the public sector moving forward is measuring the value and effectiveness of public service delivery.

Subject-matter experts largely agree that there is a trend towards using outcomes as the final arbiter of successful service delivery.

As visualised in the graphic below, organisations today are beginning to look beyond the limited notions of input, output, and profit towards growth which is much more performance-driven, outcome-based, and socially-centred.


Public sector organisations must become “outcome-oriented”

Even though the implementation of an outcome-based measurement system faces a number of systemic pressures that can be difficult to overcome due to their ambiguity, new ways of measuring value and defining value in a transparent and understandable way, there is no way around it.

Public sector organisations need to be outcome-oriented. They must understand and think in terms of performance impact and work to define a set of desirable outcomes that are aligned with their core business and vision as a public body.

In our ISS Vision 2020 Future of Public Sector Outsourcing study, subject-matter experts also indicated that here is a growing interest for public sector organisations in assessing their policy and public service impacts as well as the outcomes affecting the end-users.

Increasingly, performance evaluation relies on the output of people’s work and the type of impact it has on a particular outcome, rather than the number of hours they work.

In the mean time, the difficulty for the public sector lies in the fact that they are relatively inexperienced with outcomes internally, and thus face challenges in negotiating contracts while considering outcomes as performance measurements.

Holistic measures are required

Considering the evolving operating environment of business and government alike, success demands agility and strategies directed towards positive growth.

Consequently, there is also a need for new metrics that offer a holistic measure of performance and success.  This requires moving past pure financial considerations and include a holistic view of social, environmental, fiscal and economic dimensions.

A collaboration framework for public and private organisations must be established

An additional challenge lies in realising a mutual understanding of these notions and establishing a common framework within which private and public sector organisations can partner and collaborate independently.

Even though the premise upon which public organisations operate maintain a fundamental responsibility for citizens and society, whereas private sector organisations primarily are held accountable to owners and shareholders, the common ground of both parties is increasing.

On that basis, there is an opportunity for a new era of collaboration based on shared objectives and on equal commitment to public good initiatives.

Interviewed subject-matter experts expressed support for the idea that the provision of public services should be focused on the quality of the services but that they also support positive social outcomes, such as environmental sustainability or improved health.

This could for example include a comprehensive measure of both value for money metrics and public health metrics such as reduced hospital visits and lower incidents of diseases.

As such outcome-based metrics must act as a new mechanism for ensuring social objectives both are pursued and achieved.

Would you like to know more about the future of public sector? Download the ISS Vision 2020 White Book – The Future of Public Sector Outsourcing.

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