Public Value and Investment Analysis in Government

Both private and government organizations make large investments in resources such as labor, technology, machinery, and other forms of capital that require a sizable budget, but are justified as eventual cost-savers. Businesses have fairly objective methods of measuring return on investment of such initiatives – revenue growth or profit. Though the link between returns and costly investments can actually be tenuous and incidental in the private sphere, there is also generally a good amount of labor estimation, project management data, and other tools to help the organization measure their major investments against the bottom line.

What does a government measure against? It often has all the same analytical tools as a private organization, but value creation is not as easy to identify. That does not, however, imply that it is impossible to measure. Ultimately, investment analysis in government rests upon the concept of public value. It is more nebulous than purely quantitative measures such as profit, but has been studied carefully in academia.

Mark Moore, of the John F. Kennedy School of Government at Harvard University, is the author of Creating Public Value: Strategic Management in Government. He organizes the problems of defining public value around three questions:

 

1. Why Should a Public Manager Measure Performance?

Moore represents strategic management in government by a triangle consisting of “organizational capacity,” “legitimacy and support,” and “public value,” implying that the three are inseparable. It is easy to see how increased support for a public agency would be greatly enhanced by measuring the public value. Likewise, the capability for public value is improved by greater organizational capacity. Moore goes on to say that “performance measurement would play an absolutely critical role with respect to handling each corner of this triangle: the definition of public purpose, the mobilisation of support, and the exploitation of operational capacities by driving performance inside the organisation…”

2. Where Along the Value Chain is it Best to Measure Performance?

Moore identifies the chain for measuring public value as being a series of inputs (such as capital and legislative decrees) which are then transformed into outputs by organization activities, which subsequently have impact on all stakeholders in the chain and produce social outcome. The key here is that outputs and outcome are not the same, and there is debate over which is more crucial to measure. Moore argues that in the absence of measurable revenue, as in a business, outcomes are a substitute as a metric of success but they are extremely costly and difficult to measure. Therefore, a government organization should focus more on measuring outputs.

3. Should We Measure Customer satisfaction? Who are the Customers and What Do They Want?

The final of Moore’s three questions concerns distinguishing who is the “customer” of a government service, though he prefers to note that the government has “clients” and “citizens” rather than “customers.” Private sector analogies to customers break down: though a customer has both practical and normative value to a business, citizens are more akin to shareholders who are allowing another party to make decisions that are expected to have a long term benefit. Clients – which can be any type of actor both public and private – interact with government agencies in order to try and fulfill the expectation of citizens.

Moore draws the conclusion “that customer satisfaction in both service encounters and obligation encounters in the public sector should be designed not only to protect rights and ensure some level of client satisfaction but also to produce any changes necessary to achieve desired outcomes. This makes it necessary to distinguish between those outcomes desired by the collective client ‘WE’ and those desired by the individual client ‘I’. In other words, as citizens acting through collective political processes, we might articulate desired outcomes for individual clients, and, ideally, we are also collectively trying to help those individual clients help us achieve shared purposes.”

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