Performance Indicators in the Dutch Department of Defence

Since the 1980s throughout the Western world, attempts have been made to introduce more decentralized types of management control in government bureaucracies. Decentralization of competences and responsibilities within government organizations should improve efficiency in the public sector specifically in ‘core business’ activities, where access to the market mechanism or transfer to independent agencies is blocked. Generally, such a decentralization is considered to involve a substitution of performance controls for the input controls traditionally applied. Organization units might become ‘self-managing’ with respect to the utilization of their resources, when they could be made effectively responsible for the results obtained. In the Netherlands a reform labled contract management has been introduced into a large number of government organizations to realize this objective (Mol, 1989). Thereby targets for production are based upon explicit agreements between central management and decentral organization units. By mutual consent, then, those targets would constitute reliable benchmarks to judge performance on the basis of outcomes. Responsibility accounting should provide the techniques for performance measurement, required for the implementation of this contract management. Specifically, the development of indicator systems for the activities of organization units was expected to supply government with the instruments needed. Evaluation of efficiency in terms of input-output ratios calculated from these indicator systems should create an adequate substitute for the signals of the price mechanism elsewhere in use. The idea of contract management has triggered the development of indicator systems in many government organizations. Rarely, however, has this development reached the stage of full implementation. Indicator systems characterized by unambiguous definitions of the indicators applied, with