Results-oriented Budget Practice in oecd countries odi working Papers 209

Table 5: Definitions of key terms 
Approach Definition 
Programme budgeting 
Early approach which involved the identification of programmes 
with operational aims with costs and revenues attached to 
programmes (Dean with Pugh, 1989). 
Output budgeting 
Term used to describe the budgetary approach used in UK central 
government around 1970. Broadly similar to performance 
budgeting. (Garrett, 1972; Spiers 1975) 

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Performance budgeting 
Refers to the linking of expected results to budgets. Developed out 
of programme budgeting with an emphasis on measuring outputs 
and performance with data analysed against aims and standards 
(Dean with Pugh, 1989). Normally used as a general terms to 
cover a range of specific processes (McGill, 2001). 
Programme, Planning and 
Budgeting Systems (PPBS) 
Widely adopted under the Johnson administration in the US.
Emphasised the analysis of policy options to achieve long term 
objectives which then defined agencies programmes to produce 
outputs in line with defined long term objectives (Garrett, 1972, 
McGill, 2001). Formally discontinued in the US in 1971 
Management by Objectives 
(MbO)
Successor to PPBS. Linked agencies objectives to budget requests.
Introduced management responsibility for achieving outputs and 
outcomes, introduced the link between spending and the 
achievement of results in terms of outcomes. Used by but did not 
survive the Nixon administration (Peters, 1995; McGill, 2001). 
For example, moves towards programme budgeting in the United States and the United Kingdom 
have focused on the specification of outputs. This approach meets the needs of the efficiency 
agenda of ‘getting more for less’. 
“An output-focus to management and budgeting typically describes public functions in 
terms of goods or services and calculates how many services are being delivered, or 
products produced. An output focus is primarily oriented to indicators such as volume 
and timeliness, and to a varying degree, quality; for example how many beneficiary 
claims will be processed with minimal errors.” (Kristensen et al, 2002, p 8-9) 
Efficiency has two principal dimensions. Operational or technical efficiency is defined by Schick 
as “the capacity to progressively reduce the cost of producing the goods and services for which 
resources are provided” (2001, p 13). In the case of agencies, the result is a reduction in the cost of 
goods and services purchased by government.
Allocative efficiency is defined by Schick (2001, p 13) as “the capacity to establish priorities within 
the budget, including the capacity to shift resources from old priorities to new ones, or from less to 
more productive uses, in correspondence with the government’s objectives”. Clearly, results based 
budgeting represents a shift towards the latter and therefore represents a major departure for 
governments. Key questions involve the nature of the new methods of decision making and their 
locus.
The outputs approach is criticised because whilst it may ensure that governments are getting more 
for less, they may get more outputs that make little contribution to solving policy problems.
Therefore, many countries declare that they are adopting an outcomes focus, emphasising the 
realisation of results. However, empirical evidence shows that progress is, at present, limited. For 
many countries, it remains a goal or an aspiration rather than a description of the current state of 
affairs.

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“In outcome-focused management and budgeting, the government defines what a 
particular programme or function is to achieve in terms of the public good, welfare or 
security; for example, outcomes to reduce the incidence of disease or ensure, for most 
students, a certain level of educational attainment. Having defined the outcomes, an 
outcome system typically defines indicators, which helps assess how well it does in 
achieving these outcomes.” (Kristensen et al, 2002, p 9) 
The OECD outline describes a sub-set of new approaches to the delivery of public services which is 
often described as ‘New Public Management’. The shift from old public administration to new 
public management has fundamental implications for results based budgeting. Traditional systems 
have focused on economy of inputs, financial regularity according to budget lines and adherence to 
procedure. New public management systems permit greater flexibility of inputs and processes in 
return for greater emphasis on outputs and performance (see, for example OECD work by Blöndal, 
2001b on changes in the Canadian budgeting system). Performance based systems are intended to 
complement financial systems rather than replace them. As Netherlands based academic Pollitt 
points out, such demands for regularity are complemented not substituted by an output or outcome 
approach (Pollitt 1999c). As a paper by OECD and member state officials, Kristensen et al, points 
out, top down, input driven approaches are still with us: 
“[p]rocess-oriented management, management by political decree, legal commands and 
management by campaigning has never really gone out of fashion. Similarly, input 
controls continue to be popular with politicians and in central ministerial departments. 
Thus, the change of management regimes in OECD Member countries has generally 
been cumulative: When new approaches to management and budgeting are introduced, 
some elements of the old regime are preserved” (2002, p 17). 
Kristensen et al (2002, p 11-12) identify the key drivers for an outcome focused approach to 
budgeting and management: 
•
to increase public sector learning about how government policy can make impacts on society; 
•
to make government managers more accountable for programme performance and their impacts 
on society; 
•
to enable governments to prioritise the allocation of resources based on anticipated programme 
results; and 
•
since achieving positive outcomes involves accomplishing common objectives, to encourage 
cross-departmental working. 
They note that, with the possible exception of Australia, no government has moved directly to an 
outcome focused approach to results based management and budgeting. Instead, based on evidence 
from France, New Zealand, and Canada as well as Australia, the adoption of results based 
management and budgeting is best described as an incremental, iterative process.