Measuring, managing and delivering value performance in the public sector

International Journal of Learning and Intellectual Capital

Volumn 1, Issue 2, 2004, Pages 132-149

  Burgman, Roland ^a   Roos, G ^b  

^a Asset Economics Holdings Inc   (United States)

^b CRANFIELD UNIVERSITY   (United Kingdom)

Author keywords

CVH; economic good; EVA; intangibles; intellectual capital; performance measurement; public sector; social good; trade off

Indexed keywords

EID: 35348814077     PISSN: 14794853     EISSN: 14794861     Source Type: Journal    
DOI: 10.1504/IJLIC.2004.005068     Document Type: Article

References (32)

1. Telstra Corporation has 1.8 million shareholders from 1.2 million households (out of Australia’s estimated resident population of 19.7 million and estimated household population of 7.1 million at mid-2002), representing 9.1% of individuals and 16.9% of households, respectively.
2. It is often argued that the only purpose of corporatisation is as a prequel to privatisation (transfer of the ownership of the agency into private hands by way of a ‘trade sale’ or listing of shares by way of an Initial Public Offering (IPO)). This is not strictly true as company law generally requires an independent Board, accrual accounting and transparency of commercial dealings, amongst other things. The benefits of stricter and independent governance régime have been a major driver for creating value from Government agencies hitherto managed in a more cloistered environment.
3. Airways New Zealand is a State-Owned Enterprise, wholly-owned by the New Zealand Government. Its two shareholders are the Minister for Finance and the Minister for State Owned Enterprises.
4. The imperatives for ‘Excellence in Government’ in the US are embedded in the Government Performance Results Act of 1993 and in the President’s Management Agenda, Office of Management & Budget, The Executive Office of the President, Fiscal Year 2002, p.64.
5. If this is not possible, open questions will be – How ‘important’ is any omitted stakeholder group to us? And if important – are their views likely to be different to the views of the stakeholders that data has been captured on?
6. Agle, B.R., Mitchell, R.K. and Sonnenfield, J.A. (1999) ‘What matters to CEOs? An investigation into stakeholder attributes and salience, corporate performance and CEO values’, Academy of Management Journal, Vol. 42, No. 5, pp.507–525.
7. The terms power, legitimate and urgent are defined. Legitimacy refers to the perceived validity of the stakeholder’s claim to a stake in the issue and/or its outcomes. Legitimacy is a generalised perception or assumption that the actions of an entity are desirable, proper or appropriate within some socially constructed system of norms, values, beliefs and definitions. Urgency refers to the degree to which a stakeholder’s claims demand immediate attention. A stakeholder group has an urgent interest when its needs are of a time-sensitive nature and when they are important or critical to its mission. Power refers to the ability of a stakeholder to have an effect or impact. It reflects the probability that an individual or group within a relationship is in a position to carry out its own will despite resistance bearing in mind that powerful stakeholders may be able to exert influence which will affect a project either negatively or positively. Power is the ability to control which decisions are made and to facilitate the implementation of these decisions. Power may be coercive, based on the use of force or the threat of force; utilitarian, relying on material persuasion or incentives; or normative, involving more symbolic influence. When evaluating power, it is important to consider whether each stakeholder group has the resources – time, expertise, energy and/or technology – to achieve its ends.
8. Economic Value Added™ and EVA™ are the trademarks of Stern Stewart & Co, New York.
9. The logic of EVA is what matters here. EVA assumes a capital charge equal to the net capital employed in creating the output cluster multiplied by the weighted average cost of capital (WACC) for the enterprise. And yes, Government agencies can and should calculate and apply their WACC to investment decisions.
10. These could include performance standards, performance penalties, cost reductions, take or pay provisions, internal audit provisions and inspection rights.
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23. This is the latest development in a thought stream that builds upon the IC-Index approach, the IVM approach and the HVA approach.
24. Keeney, R. and Raiffa, H. (1976) Decisions with Multiple Objectives: Preferences and Tradeoffs, Wiley, New York. Chankong, V. and Haimes, Y. (1983) Multiple Objective Decision-Making: Theory and Methodology, North-Holland, New York, New York.
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27. Airways Corporation of New Zealand Limited Airways 2003 Annual Report.
28. Airways Corporation of New Zealand Limited Airways New Zealand Announces Annual Result, November 5, 2003, http://www.airways.co.nz/airways_International/mediaAR.shtml
29. Airways states in its Airways 2003 Annual Report (p.23), ‘EVA measures the extent to which a business is performing above or below expectation. A positive EVA means the business is adding value after allowing for a normal reward to the providers of capital.’
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31. Roos, G., Guthrie, J., Steane, P., Fletcher, A. and Pike, S. (2002) ‘Mapping a transparent enterprise; an Australian third sector organisation and understanding diverse stakeholders perceptions of intangibles’, Paper Presented to the Transparent Enterprise. The Value of Intangibles, in sponsored by the EU Commission, the OECD and the Spanish Ministry of Economics, Madrid, Spain, November 25–26, http://www.uames/meritum/conference.
32. Roos, G., Pike, S., Fernström, L. and Huth, F. (2004) ‘Measuring the value of performance in Norwegian municipalities’, forthcoming, August.