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Measures of Effectiveness for Governmental Organizations

  • Kishore Gawande

    (Department of Economics, University of New Mexico, Albuquerque, New Mexico 87131)

  • Timothy Wheeler

    (Environmental Risk Assessment and Regulatory Analysis Department, Sandia National Laboratories, Albuquerque, New Mexico 87185)

For organizations whose objective is not necessarily the maximization of a financial quantity, there is little written in the economics and management literature about methods that quantify their effectiveness. Potential users of such methodologies are typically governmental organizations and agencies to whom Congress allocates funding periodically, but may also include many nonprofit organizations. Such research is importantly needed because government is no longer making outlay allocations on a merely historical basis, but is using as a criterion how effectively an organization uses its resources in meeting its objectives. In this paper we analyze the Maritime Safety Program of the U.S. Coast Guard (USCG), which is responsible for monitoring the quality of vessels that sail in U.S. waters, and present measures of effectiveness (MOEs) for the Program. We do this at two levels of activity: at an overall program level (Level I) and at a component activity level (Level II). Poisson models are used to construct the MOEs using data on maritime casualties (accidents) between 1990--1993 from the real-time Marine Safety Management System (MSMS) database maintained by the Coast Guard. A feature of the empirical methodology is the Bayesian imputation of missing data. The MOEs constructed here have at least four important uses. First, as the name suggests, they perform the function that financial quantities such as returns on equity or returns on sales perform for private-sector organizations---that is, they are indicators of efficiency. Second, they can be used as inputs into allocative decisions within the organization. For example, the Level II MOEs can be used as inputs into a programming problem that determines the optimal allocation of resources among component activities. Third, internal performance evaluation across USCG Programs or across Port Units (called Marine Safety Offices) can be based on their respective Level I MOEs. Fourth, and possibly the most important long-run consideration, MOEs provide the basis for better regulation by the government. Without MOEs the nature of regulation is probably suboptimal. By adopting these MOEs as criteria, it will be easier for the government to redesign those aspects of its regulation of the Coast Guard which curtail incentives.

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File URL: http://dx.doi.org/10.1287/mnsc.45.1.42
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Article provided by INFORMS in its journal Management Science.

Volume (Year): 45 (1999)
Issue (Month): 1 (January)
Pages: 42-58

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Handle: RePEc:inm:ormnsc:v:45:y:1999:i:1:p:42-58
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  1. Laffont, Jean-Jacques, 1994. "The New Economics of Regulation Ten Years After," Econometrica, Econometric Society, vol. 62(3), pages 507-37, May.
  2. Cohen, Mark A, 1987. "Optimal Enforcement Strategy to Prevent Oil Spills: An Application of a Principal-Agent Model with Moral Hazard," Journal of Law and Economics, University of Chicago Press, vol. 30(1), pages 23-51, April.
  3. Laffont, Jean-Jacques, 1995. "Regulation, moral hazard and insurance of environmental risks," Journal of Public Economics, Elsevier, vol. 58(3), pages 319-336, November.
  4. John E. Brandl, 1989. "How organization counts: Incentives and inspiration," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 8(3), pages 489-494.
  5. John M. Quigley & Suzanne Scotchmer, 1989. "What counts? analysis counts," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 8(3), pages 483-489.
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