An institutional perspective on performance measurement and management in the 'new public sector'

During the 1990s, in what has become known as the 'new public sector', many services in advanced economies, such as those of the U.K. and Scandinavia, have come under pressure to become more efficient and effective, so as to reduce their demands on taxpayers, while maintaining the volume and quality of services supplied to the public. To achieve this, they have been subjected to the introduction of various 'private sector' management techniques and the frequent adoption of some form of neo-market system in which the purchasers and providers of public services have been split and are frequently required to contract with each other. In this paper, we explore the implications of institutional theory for the successful implementation of multidimensional performance measurement and management in the public sector. In particular, broadening the two-party funders and professional service providers framework of traditional institutional theory to include purchasers of public services allows us to analyse the likely impact of purchaser-provider splits on multidimensional performance measurement systems in the public sector. We show that the differing nature of the interrelationships between these three key stakeholders will influence the extent to which performance measurement in the focal service-provider organizations will be balanced and integrated. We also discuss the influence of these core concepts on the possibilities of achieving some balance between the stakeholder interests examined in the overall control of provider organizations. Five research propositions are advanced, three relating to the relationships between the focal organizations, funders and professional service providers, respectively, and two concerning the focal organization's links with purchasers. Future empirical research in this area should take the form of longitudinal case studies to track differing paths of development and their effects through time.