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

7.1 Target design and performance measures including the setting of targets, 
the use of proxies as substitutes for long term goals and monitoring
In Australia, for 2001-02, the Health and Aged Care Portfolio delivered services against nine 
portfolio-wide outcomes one of which was “Promotion and protection of the health of all 
Australians and minimising the incidence of preventable mortality, illness, injury and disability” 
(see Chan et al, 2002, p 65-6). They report that there are “10 effectiveness indicators to measure 
the achievement of Outcome 2. These range from the percentage of Medicare services that are bulk-
3
The Public Service Productivity Panel is described as “a small group of senior business people and public sector managers that has 
been established to identify ways to help improve the productivity of the public sector (http://www.hm-
treasury.gov.uk/Documents/Public_Spending_and_Services/Public_Services_Productivity_Panel/pss_psp_index.cfm 

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billed, to Commonwealth outlays per capita on Medicare in rural and remote areas compared with 
other areas. For each of the 10, numerical or descriptive targets and their source are specified”. 
Melaville (1997) examines the problem of measuring progress towards long-term goals in the 
policy area of child protection. She suggests that two conditions need to be met. First, that “strong 
and established relationship between the indicator and the result it is intended to measure” and 
second, that the “the indicator act as a proxy for other indicators moving in the same direction”. In 
both cases it is clear that research is required to establish and evidence base. 
7.2 Incentivisatio and reward structures 
The literature reviewed rarely takes the time to discuss how public servants are incentivised and 
how people are rewarded for achieving goals in detail. However, sufficient information was 
gathered through literature searches and correspondence with key individuals to enable some 
preliminary findings and conclusions to be presented. Over the last twenty years, public sector 
organisations have developed individual performance appraisal systems and, particularly over the 
last fifteen, it has become increasing popular to include elements of performance related pay to 
reward those who meet personal objectives or goals. With results oriented approaches, the major 
shift is to align human resource management systems with the strategic management systems of the 
organisation. All too often, individuals were set targets that had weak correspondence with the 
goals of the organisation. New approaches recognise that now organisations are setting SMARTer 
targets, there need to be mechanisms to ensure that people achieve those targets. Incentives and 
reward systems revolve around the five aspects of what the UK Treasury’s performance 
management framework: 
•
Aspirations
•
Target setting 
•
Accountability
•
Performance review 
•
Reinforcement (HM Treasury, undated). 
The discussion below is structured around these five aspects, with evidence from OECD as 
appropriate. It should be noted, however, that the UK model is prescriptive and is urged on 
government departments, while practice in other OECD countries is not based on this model.
However, it is significant that the Public Services Productivity Panel Unit took advice from the New 
Zealand Treasury. A further point that should be noted is the increasing role that treasuries 
(ministries of finance) play in public service management. For example, the New Zealand Treasury 
web site describes its role as “one of three central agencies responsible for coordinating and 
managing public sector performance” (Source: Treasury, 2002).