We recently enjoyed meeting Stuart Kasdin at a Netlogo workshop. 
Stuart spent some years in the Peace Corps, then a decade with the OMB
(Office of Budget Management).  Currently he's working on his
doctorate in Poly Sci at UC-Santa Barbara.

Stuart has also been thinking about “performance measurement,” the
term-of-art used by auditors and managers of government agencies. 
(In the private sector, the term often used is “forensic
accounting.”)  We have generally thought well of performance
measurement, especially as a vocabulary and tool journalists should
know about to better understand and evalutate the performance of
government.  Stuart, however, has thought about this in greater
depth, and from the perspective of someone inside the government. 
His paper, “When Do Results Matter?  Using Budget Systems to
Enhance Program Performance and Agency Management” is worthwhile
reading.


ABSTRACT: “Managing by results” is a widely used public
budgeting approach based on developing performance measures that display the
progress of a program toward its stated objectives.  This paper considers the complex environment of government
budgeting and how to establish budget systems that can successfully encourage
improved performance by managers.  The
paper assesses the limitations in how governments currently apply performance
budgeting and suggests ways that it might be made more effective.  First, performance measures must be individually
tractable and simple, as well as be coherent and revealing in the context of
other program performance targets.  In addition, performance budgeting must distinguish between
program needs based on environmental changes and those based on management
related decisions.  Finally, the
paper argues that multi-task, complex-goal programs
will typically result in low-powered incentives for program managers.  This outcome results because, even apart
from information obstacles, program managers will be rewarded or punished on only
a component of the program, representing a small fraction of the total program
performance when performance measures as increase.  A partial solution is to ensure that the number of policy
instruments is not smaller than the number of targets.”   


Click here to read the Kasdin paper.