Benchmarking and use of targets in public sector organisations

Public sector organisations Public sector organisations come in many shapes and forms. The most obvious examples are schools and hospitals, police forces and local transport providers, but there are many less visible organisations such as regulatory bodies. The objectives of public sector organisations are very different from those of commercial organisations, and this can make performance management more complicated. The following factors in particular differentiate public sector organisations from commercial: 1. They have a broader group of stakeholders than commercial organisations. This can lead to greater conflicts. Commercial organisations are likely to be mainly concerned with shareholders, employees, customers and their lenders. Public sector organisations are likely to be interested in pleasing the providers of funding (the government), the users of the service and the taxpayer. In the case of schools, for example, parents would be happy to see more money spent on education – but, as taxpayers, they may not wish to pay more taxes. 2. Customers do not pay directly for the services they receive, and there may be little relationship between the costs of providing the service and the amount it is used. Consider a subsidised bus service, for example. The daily costs of running the buses are likely to be largely fixed, and do not depend on the number of passengers using them – at least in the short term. This makes it harder to decide how much should be spent on the service. 3. Many public sector organisations operate as monopoly providers. Even if customers are not happy with the service they receive, they cannot switch to an alternative supplier. In commercial organisations, this is generally not the case, and bad performance will lead to a loss of customers and, therefore, loss of funding. 4. The output of public sector bodies is often difficult to measure. How do you determine how much work a police force has performed? Statistics such as the number of crimes reported may be used. If the police force is doing a good job however, and crime is falling, the number of crimes reported may fall. So the lower number of crimes reported would wrongly suggest that the police force is not working so hard.