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The Challenge of Measuring Productivity: A Case Study of Performance Measurement in a Job Training Program

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  • Gerald Marschke
  • Pascal Courty

Abstract

Despite the broad interest in performance measurement during the past 20 years, few state and local governments actually use performance measures as a management tool. A possible reason for this puzzle is that performance measurement systems are difficult to successfully implement. In this paper we consider a case study of a public organization that uses performance measurement to influence decision making, and we analyze local decision makers' responses. We identify a dynamic process by which local decision makers respond in unanticipated and unintended ways, and the designer has to adapt the system to try to eliminate these responses. These results show that performance measurement systems have to be continuously monitored. We argue that this need for constant monitoring may make the use of performance measures uneconomical because they may generate more management problems than they actually solve.

Suggested Citation

  • Gerald Marschke & Pascal Courty, 2002. "The Challenge of Measuring Productivity: A Case Study of Performance Measurement in a Job Training Program," Discussion Papers 02-08, University at Albany, SUNY, Department of Economics.
  • Handle: RePEc:nya:albaec:02-08
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    References listed on IDEAS

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    1. Paul Oyer, 1998. "Fiscal Year Ends and Nonlinear Incentive Contracts: The Effect on Business Seasonality," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 149-185.
    2. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    3. Cragg, Michael, 1997. "Performance Incentives in the Public Sector: Evidence from the Job Training Partnership Act," Journal of Law, Economics, and Organization, Oxford University Press, vol. 13(1), pages 147-168, April.
    4. Austan Goolsbee, 2000. "What Happens When You Tax the Rich? Evidence from Executive Compensation," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 352-378, April.
    5. Chevalier, Judith & Ellison, Glenn, 1997. "Risk Taking by Mutual Funds as a Response to Incentives," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1167-1200, December.
    6. Murphy, Kevin J., 2000. "Performance standards in incentive contracts," Journal of Accounting and Economics, Elsevier, vol. 30(3), pages 245-278, December.
    7. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
    8. W. Norton Grubb & Lorraine M. McDonnell, 1996. "Combatting program fragmentation: Local systems of vocational education and job training," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 15(2), pages 252-270.
    9. Kathryn H. Anderson & Richard V. Burkhauser & Jennie E. Raymond, 1993. "The Effect of Creaming on Placement Rates under the Job Training Partnership Act," ILR Review, Cornell University, ILR School, vol. 46(4), pages 613-624, July.
    10. James J. Heckman & Jeffrey A. Smith & Christopher Taber, 1996. "What Do Bureaucrats Do? The Effects of Performance Standards and Bureaucratic Preferences on Acceptance into the JTPA Program," NBER Working Papers 5535, National Bureau of Economic Research, Inc.
    11. Howard S. Bloom & Larry L. Orr & Stephen H. Bell & George Cave & Fred Doolittle & Winston Lin & Johannes M. Bos, 1997. "The Benefits and Costs of JTPA Title II-A Programs: Key Findings from the National Job Training Partnership Act Study," Journal of Human Resources, University of Wisconsin Press, vol. 32(3), pages 549-576.
    12. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    13. Brown, Keith C & Harlow, W V & Starks, Laura T, 1996. " Of Tournaments and Temptations: An Analysis of Managerial Incentives in the Mutual Fund Industry," Journal of Finance, American Finance Association, vol. 51(1), pages 85-110, March.
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    More about this item

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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