Performance Management, Managerial Authority, and Public Service Performance

Abstract

A central notion of performance management reform is that outcome-based accountability should be accompanied by increased managerial authority, thereby granting managers the flexibility to engineer performance-oriented change. Studies have revealed, however, that managerial authority does not follow automatically when performance management is adopted. This article examines whether increased managerial authority does indeed promote the effectiveness of performance management. The article relies on a 4-year panel on management and the performance of more than 45,000 students in 314 Danish schools and includes detailed socioeconomic controls, which allows for a differences-in-differences design. Unlike previous studies, these data provide simultaneous variations in both performance management reform and managerial authority. Testing four dimensions of managerial authority, the article finds that managerial authority over human resources positively moderates the effect of performance management, whereas decentralizing goal setting works in the opposite direction. These findings may help account for the differing effects of performance management found in previous studies and suggest that decision makers should be cautious about only partially adopting accountability-based reform.