Academic journal article The Journal of Social, Political, and Economic Studies

Examining Performance in State-Owned Organizations

Academic journal article The Journal of Social, Political, and Economic Studies

Examining Performance in State-Owned Organizations

Article excerpt

The plethora of economic difficulties that confronted many state-owned organizations in the late 1970s and early '80s culminated in higher taxes and rekindled taxpayers' interest in scrutinizing the role of the state, especially in its ability to deliver services and allocate resources adequately to meet societal needs. This paper examines the importance of developing indicators to evaluate results of performance. It also examines the possibility of adopting an open balance sheet approach to assess performance through the development of composite performance indicators. It seeks to add to the efforts currently underway by the Government Accounting Standards Board to develop and adopt appropriate performance indicators for state-owned organizations.

In an interesting introductory paragraph to Reinventing Government, Osborne and Gaebler (1993) drew attention to Time magazine's cover question: "Is Government Dead?" Perhaps, Time's question was an appropriate one, especially in the wake of dwindling confidence levels among taxpayers. As the '90s kept rolling, many taxpayers seemed to be saying yes to Time's popular question (Osborne, and Gaebler, 1993). A recent study initiated by President Clinton to review performance in the public sector found that only 20% of Americans trust the government to do the right thing. This was in sharp contrast to 76% in 1963.

Several reasons can be cited to justify the erosion of confidence among citizens. First, many state governments confronted the decade of the '80s with complex financial difficulties. As a result, many were distracted from performing adequately their traditional roles of priority setting, resource mobilization and allocation, including the provision of essential services to citizens.

Second, prior to the '80s, many governments had faced protracted periods of fiscal imbalances which included acute shortages of resources. This culminated in lay-offs, dwindling services and lowered credit ratings for many. It also led to tax revolts by citizens who demanded efficient government or more services for less money.

Third, privatization of state assets, and transfers to the private sector of some activities previously performed by governments, appeared not to have resolved many of the problems that confronted them.

Fourth, issues of accountability and transparency became important to taxpayers and the rest of society, as measures of efficiency and effectiveness for evaluating performance. It is this fourth element that is of interest to this paper, which seeks to examine the importance of developing acceptable measures for assessing performance of state-owned organizations. It is the contention of this paper that the uses of acceptable performance indicators to assess results of operations of state-owned organizations will ease access to financial information, foster accountability and throw more light on issues of managerial efficiency and effectiveness.

To discuss this further, the paper is divided into three parts. Part one provides an operational definition for state-owned organizations. It also summarizes the literature on the rationale for `less than optimal' performance within state-owned organizations. Part two examines other factors that may have contributed to inadequate performance and non-attainment of objectives in some cases. Part three introduces critical elements that can be packaged to develop composite indicators. It also examines how these indicators can be used to address questions of efficiency, effectiveness and accountability. State-Owned Organizations and Arguments for Nonperformance (i) State-Owned Organizations

The "public sector" tends to have different boundaries in different contexts. Sometimes, the term is used to include government-owned enterprises trading in genuine markets. For instance, the public sector sometimes refers to publicly-owned utilities, investment and trading companies operating in relatively monopolistic markets. …

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