Financial Strategy, Second Edition

Section 5

Measuring Performance

SECTION OVERVIEW

Janette Rutterford

As I mentioned in the Introduction, one of the changes affecting organisations, whether privately owned or public sector, has been the increased emphasis on performance measurement. The UK 1980s privatisation of the major utilities has led to traditional monopolies being run by private sector firms, subject to regulators imposing both financial and operating performance targets. For example, hospitals, prisons, train companies, all have their operating performance measured and this performance, relative to pre-set benchmarks and published as league tables, affects their revenues. Late trains mean that the train operating companies incur fines. Schools failing to achieve the requisite numbers of A level passes receive less funding. And so on. One example of the introduction of financial performance into the public sector is the introduction of Best Value for local authorities through the Local Authorities Act of 1999. This required English local authorities, from April 2000, to implement the 4Cs: consult about the level and method of providing services, compare its performance with other authorities and past performance, challenge the status quo of its provision and assess the competitiveness of its service provision in comparison with other authorities and the private sector.¹

The UK privatisation programme was accompanied by the modernising of public sector accounting. Instead of the traditional cash-based accounting ...