Are Performance-Based Accountability Systems Effective? Evidence from Five Sectors

D uring the past two decades, performancebased accountability systems (PBASs), which link financial or other incentives to measured performance as a means of improving services, have gained popularity among policymakers. For example, the No Child Left Behind (NCLB) Act of 2001 (Pub. L. 107110) combined explicit expectations for student performance with well-aligned tests to measure achievement, and it included strong consequences for schools that did not meet performance targets. In the transportation sector, cost plus time (A+B) contracting has become a popular means of streamlining and speeding up highway construction projects, while, in health care, there are more than 40 hospitals and more than 100 physician/medical group performance-based accountability programs (popularly dubbed payfor-performance, or P4P) in the United States. Although PBASs can vary widely across sectors, they share three main components: goals (i.e., one or more long-term outcomes to be achieved), incentives (i.e., rewards or sanctions to motivate changes in behavior to improve performance), and measures (formal mechanisms for monitoring service delivery or goal attainment). But, while the use of PBASs has spread in the public sector, little is known about whether such programs are having the desired effect or how to design them to be as effective as possible. To address this gap, a RAND study examined several examples of PBASs, large and small, from a range of public service areas. The study focused on nine PBASs, drawn from five sectors: child care, education, health care, public health emergency preparedness (PHEP), and transportation. The study suggests that PBASs represent a promising policy option for improving the quality of service delivery in many contexts. However, evidence of PBAS effectiveness is rare, and successful design requires careful attention to the selection of incentives, performance measures, and implementation issues, as well as rigorous evaluation to monitor the program’s effectiveness.