Examining non-linear relationships in strategic planning, performance measurement and public service performance

The advent of public management, a focus on outcomes and results, has led to the adoption of strategic management practices in public organizations and academic interest therein (Ferlie and Ongaro 2015, Poister, Pitts, and Edwards 2010). Strategic management in public organizations encompasses strategy formulation (i.e. the process of strategy making), strategy content (i.e. the stance and actions resulting from strategy making) and strategy implementation (i.e. the follow-up and evaluation of selected strategies and actions) (Bryson, Berry, and Yang 2010, Boyne and Walker 2004). In order to connect strategy formulation and implementation, public organizations can use strategic management tools such as strategic planning to define strategic goals (SG) and action plans (AP), and performance measurement (PM) to define performance indicators (PI) linked to these SG and AP, and set targets for these indicators (Poister 2010). Underlying strategic management's popularity among public administration scholars is the assumption that strategic management is linked to public service performance (PSP) (Boyne and Walker 2010). Legislative initiatives in some jurisdictions have imposed strategic management tools upon governments –e.g. Government Performance and Results Act in the United States, Best Value in England and Wales, and the Policy and Management Cycle in Flanders, Belgium. The implementation of these practices suggests that policymakers believe these tools will "work" in a public-sector setting. There are, however, critical voices about the use of strategic management tools in public sector settings. For example, Bovaird (2008) strongly challenges the effectiveness of planning-based tools in public organizations arguing that more emergent types of strategy making are necessary for the complex, adaptive nature of the public sector. Empirical evidence from large-n quantitative studies examining the strategic management-PSP relationship is limited. Given the concerns about the value of strategic management tools in public organizations, and in particular concerns associated with strategic planning and performance measurement, richer empirical evidence is essential to more clearly understand the relationship between these tools and PSP (George and Desmidt, 2014). Such evidence can help to address the contradiction where, on the one hand, strategic management tools are being adopted by public organizations worldwide and, on the other hand, we do not fully know whether these tools actually deliver on their promises, and rebuff critiques. This study addresses this contradiction by positing that while SG and AP (i.e. core elements of strategic planning) and PI and targets (i.e. core elements of performance measurement) are associated with PSP the relationship is not linear. Building from propositions developed by Boyne (2010) for PI and targets we hypothesize that this association is concave and curvilinear –indicating that, initially, a positive association exists but this association becomes negative when too many SG, AP, PI and targets are put in place. This hypothesis is tested by drawing on data from 308 Flemish municipalities. In Flanders (i.e. the northern, Dutch-speaking part of Belgium), municipalities have been obliged by the Flemish Government to formulate a multi-annual plan including SG and AP for the 5-year policy cycle 2014-2019 with PI and targets tied to these SG and AP. One of the key rationales underlying this obligation, is the Flemish Government's expectation that this system will improve the financial performance of municipalities and, specifically, their "Self-Financing Margin", a measure that evaluates the long term financial stability of a municipality. To address this, data for the independent variables are gathered by analyzing the multi-annual plan of each Flemish municipality and data for the dependent variable are gathered by identifying the Self-Financing Margin in the annual account of each municipality. Due to our hypotheses and data both a linear and nonlinear model are tested using OLS regression analysis. Preliminary multivariate statistical results show that strategic goals and performance indicators –two central elements of strategic planning and performance measurement– have a concave curvilinear relationship with PSP, implying an initial positive association which becomes negative when too many strategic goals and performance indicators are formulated. This finding ties in with the essence of effective strategic management tools, namely to provide focus and make fundamental choices on the organization's course. The contributions of this study to public administration theory and practice are threefold. First, we address the calls for more large-n quantitative evidence by investigating the relation between strategic planning, performance measurement and PSP in all 308 Flemish municipalities. Second, by hypothesizing and testing for nonlinear relations between strategic planning, performance measurement and PSP, we theoretically and empirically extend previous research by incorporating a core assumption underlying strategic management theory into public management theory; namely that successful strategic management tools should offer focus and prioritization in order to avoid "muddling through" –an abundance of tools could thus be counterproductive (Porter 1996). Third, our paper is relevant to policymakers because it tests a core assumption underlying many NPM reforms, that strategic management tools enhance the PSP of public organizations (George and Desmidt 2014, Jimenez 2013).

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