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If public sector made pizzas, then maybe it would measure up
Imagine this ad. A pair of bored young eyes stares out of the TV screen at you. The camera pulls back. You see the bored eyes belong to a teenaged boy, with freckles and spots. He’s wearing a white hairnet and has headphones on. He looks bored out of his mind, so bored he’d happily be punched in the face just for variety. The camera pulls back again. You see the boy is standing at a conveyor belt, putting sliced mushrooms on the pizza bases that whizz past him. The image goes black. In large lettering the message of the ad is: STAY IN SCHOOL. The ad ends.
What does it mean for our poor bored teenager to be more productive? If he produces more pizzas in the same amount of time, he’s being more productive. If he wastes fewer mushrooms, he’s being more productive. If he works for less—meaning the owners lower the costs of their inputs—he’s being more productive.
This primitive notion of efficiency essentially asks: can we get superior outputs, given the set of inputs being used? In the simple example there’s usually a simple answer. In real life it is harder, but the private sector manages to measure its efficiency pretty well.
The public sector has a harder time, simply because a lot of the services provided by the public sector wouldn’t be provided by the private sector at all. The goods and services provided by the public sector are usually provided either free at the point of use—most roads for example–or at a price that is not determined by the usual market forces.
All of this means it is much harder to define the output a public sector body `produces’. What is the overall output of a police force? Or a school? Or a hospital? What happens when these processes can’t control the price, volume, or quality of their inputs?
What does `efficiency’ mean, when the State has committed its public services to doing more (or in some cases, the same) with less. Taxpayers have every right to be annoyed when the annual Comptroller and Auditor General report details wastage and inefficiency across almost every section of the public service. It’s a hardy annual for the media. The relevant Secretaries General are hauled into an Oireachtas meeting and given a clip about the ear, and that’s about all that happens until the next year. Why is there so little done?
Think about the Department of Social Protection. Each week it makes welfare payments to rough 1.4 million people, disbursing an annual budget of 21 billion euros, and it managed to overpay over 63,000 people in 2011, due in 44% of the cases to errors by clients, 38% of cases to suspected fraud, 12% estate cases, and only 6% of the time to departmental error. The total cost of over 63,000 cockups was 92.4 million euros. Surely more than a stern talking to is in order? Why wasn’t someone fired? Will it happen again next year? Is there a way to reduce the number of cockups from 63,000 to 30,000? Who will be the Department official in charge of cockup minimization?
Maybe asking for private sector efficiency is asking the wrong question.
Many attempts have been made to measure the efficiency of public services. One 2005 study ranked 22 countries by their efficient use of inputs to outputs. Ireland ranked 5th for input efficiency and 6th for output efficiency, not a bad score for a small country. Ireland was also the only country studied where the public service efficiency improved on average from 1990 to 2000.
Recent research has come out strongly against the notion that the efficiency of the public service can be measured in the same way as the private sector. There are many reasons but essentially it boils down to the observation that you can’t qualitatively compare chalk with cheese.
The size of the public sector really matters for the economy. Overall the research shows that countries with small public sectors report the `best’ economic performance, while countries with larger public sectors show more equal income distribution. In that sense the size of the public sector may represent a societal choice about fairness.
With all that said, despite the measurement difficulties, we can all agree the taxpayer is entitled to as much value for their money as possible. The question is how, exactly, do we in the public sector show the taxpayer they are getting that value for money? The answer isn’t simple.
Two simple concepts can be used: performance indicators, which measure specific factors that are thought to provide a partial reflection of underlying efficiency, and global measures, which are designed to provide an indication of overall organizational efficiency. The global measures of efficiency essentially revolve around ratios of people in a sector employed as compared with other countries.
These performance indicators have to be designed sector by sector. Take universities. Does it make sense for us to measure the number of first-class honours degrees we give out? Probably not. If that’s the measure that attracts funding, many more firsts will be given out, and the value of the degree award will be lost. Does it make sense for us to measure the number of publications each faculty member has in high quality journals? Yes it does. Does it make sense to apply that publication measure to teachers? Of course not.
The public sector doesn’t produce pizzas, nor should it. But we should be careful when comparing the private and public sectors. A lot of the time, they don’t do the same jobs, and so shouldn’t be measured in the same way.
Published in the Irish Independent, 2nd October 2012.
2012-10-02 21:42:09
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