How Can Our Public Sector Perform Better?

Our PSUs need to become leaner, smarter and more efficient. We must put systems in place to enable that.

As the BJP-led coalition government prepares for its final year in power before the general elections next spring, we can expect a series of commentary and analyses on the government’s performance. The recent Union Budget delivered by the Finance Minister gave us a sneak-peek into the past performance of the ministries, departments and the 257 central public sector enterprises (CPSE). However, the performance of the public sector is often overshadowed by the excessive attention given to policy announcements and ambitious government programmes, especially during election years.

Governments worldover are embracing the idea of becoming leaner, smarter, and more efficient in order to deliver better services and earn the trust of their citizens. By systematically measuring and managing the performance of public sector agencies, governments can efficiently allocate resources, achieve intended results and determine which programmes to continue or not. As governments are ultimately accountable to their citizens, it is important that we understand how our own government manages its own performance.

Performance management is a common exercise in the private sector where profit-motive drives innovation and change. However, the baseline objective of the public sector is to create ‘public value’.  In order to create public value, public managers must satisfy the needs, perceptions and desires of the citizens. Because the government is answerable to a higher number of stakeholders who have different sets of goals and competing interests, developing an appropriate performance management system for the public sector, with all its complexities, is challenging to say the least.

Evolution of public sector performance management

The origins of performance management in the public sector can be traced back to China, where the Qin Dynasty began the practice of promoting officials not on the basis of personal ties to the ruler, but on merit and experience, thereby laying the foundation for an impersonal State. The Wei Dynasty in China, had an ‘Imperial Rater’ from the bureaucracy to evaluate the performance of the ruler and his family. Even the ancient Indian treatise of Arthashastra refers to the conduct and performance of the Kings and the government superintendents.

The modern-day performance management system finds its roots in the works of Frederick Taylor which were developed before the Great War. Early adopters in the private sector, like the chemical giant DuPont, used performance reviews to provide information to the management which had traditionally been in the workers domain. It became a regular practice in the public sector soon after the US military adopted it to appraise its officers in the 1920s. Over the next century, performance management in the public sector went through several iterations from a centralised ‘plan-programme-budget’ model to a more multi-directional and bottom-up approach, leading to the development of decentralised frameworks like the Balanced Scorecards and Result-based Management.

How does India’s public sector fare?

Until recently, the Indian public sector had a disjointed performance management framework which was introduced at irregular intervals. In 2009, the former prime minister Dr Manmohan Singh, appointed Dr Prajapati Trivedi, a former World Bank economist, to design and implement a decentralised and evidence-based system that would inform decision-making at all levels. Dr. Trivedi developed a three-tier system which comprised of performance information, evaluation and monitoring, and performance incentives which was later consolidated and brought under the umbrella of Performance Monitoring and Evaluation System (PMES)

PMES was an innovative reform which was designed to follow the whole-of-government approach where ministries and government agencies would achieve shared goals through an integrated response. The crux of the system was the ‘Result Framework Document’ (RFD), which is a comprehensive document that recorded the agreed objectives of a department, the success indicators, the actions taken to achieve these objectives and how progress is to be monitored in implementing these actions. At the end of the year, all departments calculated a composite score to create a benchmark competition and show the extent to which they were able to meet their objectives.

The system promoted inter-agency cooperation by linking the performances of various departments. For example, the Ministry of Drinking Water and Sanitation had its targets and incentives linked with the Ministry of Water Resources, Ministry of Finance, Ministry of Rural Development, Department of Land Resources, among others. The logic was to ensure horizontal alignment by promoting joint accountability. Although this might seem commonplace in the private sector in India, it was unprecedented in the public sector.

PMES was lauded for its effectiveness and its ability to integrate different aspects of performance under one comprehensive system. A report published by a credit rating agency indicated that PMES had improved governance, delivered better public services and was in line with the best practices. This was reflected in the profitability of CPSEs which increased by 52 percent between the years of 2009 and 2014. Further, the rate of grievance disposal also increased by over 100 percent during the same period. PMES also generated interest among policymakers from the SAARC countries which led the Indian government to organise a workshop to share its knowledge and experience.

However, the system was certainly not without flaws. It was an expensive exercise and the additional workload of completing lengthy RFDs did not sit well with the bureaucracy. Because incentives were closely linked to performance, public managers were focusing only on the targets and ignoring other important tasks. The system was susceptible to gaming, where low targets were set in order to achieve them. Finally, reducing the departmental performance to a single number often ignored several ‘human’ dimensions which were more difficult to measure.

Then, in 2014, the newly elected prime minister, Narendra Modi, brought the performance reviews of all the ministries and various agencies under the scope of the Prime Minister’s Office (PMO). Prime Minister Modi eventually discontinued PMES because he did not think it was viable to quantify the performance of the public sector. However, according to Dr. Trivedi, the Prime Minister did not want to carry forward a successful legacy of the Manmohan Singh government.

With a penchant for creating bold initiatives with amusing acronyms, the government in collaboration with NITI Aayog, a policy advisory think-tank, developed the Pro-Active Governance And Timely Implementation platform or PRAGATI. Unlike PMES which encompassed all aspects of the government, PRAGATI follows a project/programme management approach which prioritises key areas. The platform was designed exclusively for the use of the prime minister and has streamlined the way the prime minister interacts with the union government secretaries, state chief secretaries and Indian ambassadors overseas, in order to track the progress of different projects. PRAGATI has had a positive impact in getting results from a stubborn bureaucracy because the monitoring takes place at the highest office. But the department heads did not mind these changes as they were glad to not have to fill out tedious RFDs anymore.

PRAGATI tracks real-time progress of various projects, leakages in government programmes, and public grievances. It does this through an advanced dashboard which consolidates information regarding key performance metrics from various databases, including the Ministry of Statistics and Programme Implementation (MOSPI), Project Monitoring Group (PMG) and Centralised Public Grievance Redress and Monitoring System (CPGRAMS), the latter two of which were introduced by the Manmohan Singh government. Two additional portals were launched by the current government: e-Samiksha which tracks the ‘follow-up’ actions after the meetings chaired by Prime Minister Modi, and the e-Nivesh Monitor which deals with regulatory clearances.

According to his official website, Narendra Modi has chaired 25 meetings since PRAGATI’s inception and he has reviewed 227 projects with a total investment of approximately USD 158 billion. The website further claims that several stalled projects and public grievances have been resolved. Of course, this information cannot be verified due to the exclusivity of the platform.

Additionally, NITI Aayog has been tasked to use this platform to calculate composite scores and rankings of states according to their performance in various indices, like the Ease of Doing Business. A similar programme to rank the poorest districts was also recently launched. These rankings have been designed to “name and shame” the laggards in order to spur momentum and increase competition. Unfortunately, it has also created a system that promotes a culture of intimidation and creates a sense of discord.

There are other challenges too. Only certain projects which have the close attention of Prime Minister Modi are given priority. Further, the system has been putting strain on the Centre-State cooperation by allowing the Prime Miniser to circumvent the chief ministers and interact directly with the chief secretaries. Additionally, the data collected is not openly shared between government agencies or with the wider public for critical review. As a consequence, department heads do not have the entire picture of the government’s performance and this allows for inefficiencies to migrate to neglected programmes and departments.

The future of performance management

The Indian government is a complex beast with no single ministry/agency managing the performance of the public sector. Presently, the performance management system is highly fragmented and depends on conventional tools like budgets, Memorandum of Understandings (MoU), periodic reviews, action plans, and performance audits conducted by the Comptroller and Auditor General (CAG). To ensure more accountability and transparency, a coherent and unified performance management framework is urgently required. The following are some suggestions to improve the existing framework.

First, the government should reinstate cross-agency collaborations as envisioned by PMES and strengthen horizontal linkages. This can be achieved through joint targets, better data sharing between agencies and by making departments jointly accountable to lift the performance of the public sector as a whole.

Second, as technological advancements like Big Data Analytics matures, conversations will become less about mundane reporting and more about larger strategic goals. The government already collects tonnes of data but due to the lack of a coherent framework, these datasets don’t necessarily interact with each other, rendering them useless. Moreover, systems like PRAGATI are cloaked behind secrecy and do not involve citizen participation. Sharing data with the civil society can help governments gain cumulative dividends in terms of trust. It also send a signal to the voters that the government is interested in encouraging a representative democracy.

Third, methods like ratings, rankings and calculating composite scores are ineffective. Reducing a year’s worth of effort to a single number is dehumanising and humiliating for those departments which don’t fare well. Rankings tend to create unhealthy competition between departments and create an environment not conducive for cooperation. According to Deloitte, a consulting firm, the process of ratings are an old-fashioned view of labour relations. Organisations which provide high level of development planning, coaching and feedback, instead of evaluation, reduce voluntary turnover by one third and generate twice the revenue per employee.

Finally, rigid top-down systems like PRAGATI and PMES, which are often fixated on performance metrics, ignore unintended consequences like gaming and effort substitution. Public managers who are aware of the inner workings of the system might try to manipulate their efforts or falsify results to show that targets are being achieved, especially if performance is linked to incentives. However, if incentives are tied to team efforts and are designed after careful consultation with public managers regarding goals and targets, they can improve the performance of the public sector.

Effective performance management systems can significantly improve the performance of the public sector in India. While it should not become an imposed intervention, it should evolve to reflect the lessons learnt over time. Centralised and rigid systems like PRAGATI and PMES can impede the culture of creativity and cooperation in the government. Further, these systems should be independent from political interference. Public managers should be able to use these lessons to monitor, guide and eventually achieve outcomes that translate into measurable impact, which are then critical to measuring the success of a government’s strategy in creating public value.

About the author

Anirudh Menon

Anirudh Menon is a public sector consultant and holds an MPA from University College London where he was a Chevening Scholar. He was part of the 12th cohort of the Graduate Certificate in Public Policy (GCPP) at The Takshashila Institution.