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Public Finance and Management, 4(3), 2004 pp. 317-351 IMRPOVING PUBLIC SECTOR PERFORMANCE MANAGEMENT: ONE STEP FORWARD, TWO STEPS BACK? Carolyn J. Heinrich LaFollette School of Public Affairs University of Wisconsin-Madison Abstract This empirical study of the performance management system in the U.S. Workforce Investment Act (WIA) program identifies challenges and prospects for implementing performance management systems effectively in public agencies. The analyses of performance standard setting processes and relationships among standards and state performance levels demonstrate that setting performance targets is a key task that determines the nature of incentives in the performance management system. In the absence of regular adjustments to performance standards for changing local conditions, the WIA system appeared to promote increased risk for program managers rather than shared accountability. Program managers, in response, appeared to make undesirable post-hoc accommodations to improve measured performance. INTRODUCTION Although performance measurement as a management tool has a long history dating back to the 1800s, it is primarily in the last two decades that public-sector performance management has shifted to an explicit focus on measuring outcomes and rewarding results (Heinrich, 2003; Radin, 2000). The United Kingdom’s Next Steps and the U.S. Government Performance and Results Act (GPRA), for example, are government-wide initiatives that require agencies to specify quantitatively measurable goals and to evaluate performance toward these goals. This study is one in a growing body of work that aims to describe and draw lessons from public agencies’ experiences in implementing these systems and to identify ways to increase their effectiveness, in addition to improving agency performance (Hatry et
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318 al., 2003; Heckman, Heinrich and Smith, 2002). Among U.S. federal government agencies, the Department of Labor (DOL) has been a “pioneer” in the development of performance management systems (Barnow, 2000). Before GPRA, the Job Training Partnership Act (JTPA) of 1982 introduced performance standards for public employment and training program outcomes (e.g., job placement rates and trainee earnings) and the use of budgetary incentives based on performance to motivate agency staff. In addition, two randomized experimental evaluations, of the JTPA program in the 1980s and the Job Corps program in the 1990s, provided important information for assessing the performance of these performance standards systems in measuring program impacts. Policymakers and public managers have since drawn from the results of these studies to inform the design and operation of performance standards systems in government programs. In the Workforce Investment Act (WIA) of 1998 that replaced the JTPA program, a greater emphasis on performance accountability was described as a “hallmark” of the legislation (Sheets, 2002; U.S.
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