Performance Evaluation and Management in Korea: An ...



Performance Evaluation and Management in Korea: An Integrated System for Planning, Management and Budgeting

O-Taeg Shim

Vice Minister for Policy Analysis and Evaluation,

Prime Minister's Office, The Republic of Korea

Abstract

The Korean government adopted a performance management and evaluation system for the first time in 1961, marking 2011 its 50th anniversary.

Following the Korean War, Korea has gone through dynamic changes beginning with the Economic Development Plan in 1960, the industrialization process in the 1970s, the democratization movement of the 1980s, the IMF economic/financial crisis in 1997 through the global financial crisis of 2008. In the midst of the changes and growth periods, the performance management and evaluation system has been taking a pivotal role in presenting effective directions for the national affairs.

Currently, the performance management and evaluation of the Korean government subjects major projects of all the administrative bodies to annual evaluation once every year. The evaluation focuses on the performance of each evaluatee and its feedbacks are used for policy improvement, budgeting, organizational and personnel management.

The lessons and experience that the Korean government has learned over the course of establishing its performance management and evaluation system in place will likely provide valuable lessons and case studies for those developing countries that are preparing for economic development programs or have gone through national crises similar to those of Korean in terms of policy management and national affairs.

The Korean government will share its experience of the performance management and evaluation system as part of the Official Development Assistance for developing countries and continue to strengthen its collaboration with the international community.

Introduction

Performance management has been at the center of government reform in many countries around the world in the past two decades. Performance management as an integral mechanism for planning, management and budgeting is indeed an excellent framework for public management in terms of improving strategic planning, managerial efficiency and democratic accountability.

In recent years, however, performance management in the public sector appears to be losing its political support, surprisingly in advanced countries. Performance management has not been quite successful in dealing with ill-structured and multi-collaborative macro problems, such as global financial crisis, trade deficits, unemployment, national disasters, and so on. Performance management may not receive positive feedback from the employees when the focus is on micro-management as a control mechanism.

The benefit of performance management will be realized only when the system is properly devised and implemented for the people in the system. I strongly believe that performance management is still one of the most effective governance tools for most developing countries.

The Early Challenges

South Korea has a long history of implementing the so-called results-based performance management system. Sixty years ago, South Korea was devastated during the Korean War. But the country emerged from the ashes of the War. There are many reasons for South Korea's economic miracle. One reason, maybe the most convincing one, is that the whole country poured all the resources and efforts into economic rebuilding: that is, I would name, a strong case of vision-driven and results-based management. The then-policy makers, bureaucrats and citizens all together could see what changes would happen after five years and after another five years.

Thanks to the country's vision-driven and results-based management, South Korea moved from the ranks of developing nations to one of the newly developed nations in the late 1990s. But the country had to face more sophisticated and multilateral problems associated with democratization, globalization and increased uncertainty.

The rapidly changing information society and more competitive knowledge-based economy pressured the Korean Government to redefine the role of government, and reinvent its own way of doing business to build a more competent and effective government. At the same time, the twin problem of dwindling tax revenues and pressing needs became a reality undermining the government's ability to adequately address people's needs and deliver services with quality and efficiency.

But unfortunately policy makers had no clear idea which programs were successful and which were failing, resulting in waste and inefficiency everywhere in government.

The Early Responses

As a response to these problems, South Korea joined the journey of "reinventing government" and re-formulated its old "results-based performance management" systems by synthesizing the experience of others, such as the United States' Government Performance and Results Act of 1993, President's Management Agenda, the United Kingdom's Public Service Agreements, Australian Portfolio Budget Statements approach, and many.

The early version of performance management system in Korea can be characterized as:

① First, mission-driven strategic governance,

② Second, anticipatory planning and implementation,

③ Third, results-based accountability, and

④ Fourth, integrated management and implementation.

Here, I'd like to explain each one in brief.

(1) First, mission-driven strategic governance is a process of making decisions and implementing them in alignment with government-wide mission. This approach provides an effective procedure to establish priorities and clarifies agency standards for accountability and expectations on overall performance.

(2) Second, anticipatory planning and implementation helps agencies and program-managers to predict the future accurately in the process of planning, detect the problems timely in the process of implementation, and refine the programs regularly through evaluations and feedback. Performance management systems should prepare agencies and program-managers to anticipate the future, prevent problems, and correct mistakes as timely as possible. This has been extremely difficult in a short-sighted political and administrative environment.

(3) Third, results-based accountability helps agencies and/or program-managers to articulate what results are expected, what data are regularly collected and reported, and how agencies and programs are evaluated. The process of establishing a results-based performance management system is closely aligned with the process of mission-driven governance, strategic planning and performance measurement. The basic unit of analysis for performance evaluation is called "unit task." Here, the unit task is the bridge to link the two different types of management structures: the function structure and the program structure.

(4) Fourth, various performance management systems are linked to each other through a newly invented business processing system, called "On-nara BPS." The On-nara BPS is the core e-Gov system that aims to improve government capacity, transparency and accountability in a systematic way across the government. The On-nara BPS accommodates not only document processing but also task & program management online. It works as a backbone system that facilitates efficient linkage to other management systems, such as performance management, program evaluation, knowledge management, records management, auditing, human resources management, etc.

Most of all, the legal foundation to integrate various performance management and evaluation systems was provided by enacting the “Government Performance Evaluation Act” in 2006. The Act intends to improve decision quality and transparency; strengthen efficiency and effectiveness of doing business; make the government accountable to the people with its results; improve trust in government; and reduce the administrative burden of preparing numerous evaluations.

In 2007, the so-called electronic-Integrated Public Service Evaluation System(e-IPSES) was launched to administer performance evaluations with efficiency and accuracy. e-IPSES facilitates each agency in real time to integrate numerous types of performance evaluation information produced by various management & evaluation systems, such as On-nara BPS, e-Human Resources Management, Digital Budget and Accounting, e-Auditing, etc.

New Challenges and Problems

The Korea's performance management & evaluation system equipped with various e-government tools appears advanced and efficient. However, many government officials were not fully satisfied with the system and practices although they agreed that performance-based management was necessary in principle.

Many experts are also quite skeptical about the efficacy of the early version of performance management system that reduced performance management to a score management system in which employees are more driven into improving their scores rather than improving the government performance. The early designers forgot, if not misunderstood, the very basic principle that “[p]erformance management is a technology for creating a workplace that brings out the best in people while generating the highest value for the organization” (Daniels & Daniels: 2004, 7).

The newly emerged challenges and problems are manifold. I'd like to point out some critical new challenges and problems.

(1) First, in Korea, the impetus came from administrative initiatives and legislative mandates, rather than each agency's own needs for better performance. This led early-designers to focus more on technical aspects rather than fundamental issues relating to ‘why we need a new management system now?’ and ‘what values the new system will bring about for the organization?’

(2) Second, it appears that conceptual designers haven’t paid much attention to ‘what the meaningful meaning of performance is in the public sector.’ The meaning of performance can be defined variously. The values essential in the public sector include not only economic values but more fundamental values, such as due process and public interests. However, by focusing on the economic performance, early reformers oversimplified and downgraded the public values of government.

(3) Third, the early designers in Korea perceived performance management mainly as performance evaluation, assuming that evaluating performance would promote competition among workers and eventually bring about worker efficiency. Presumably, early designers aimed to institute an incentive mechanism in the management process. As a result, the main focus of performance management was on evaluating the performance of government officials and agencies. This approach has created unproductive competition in some areas, and uncomfortable feelings about the evaluation results. In this culture, as Niven points out, “it turns out that most employees were convinced that in the absence of a stated reason …, their boss was planning to use it as a tool for generating layoffs …, and as a result they were refusing to provide any support for the implementation” (2005: 24).

(4) Fourth, despite Korea’s best efforts, the implementation began to struggle, and employees began to ask questions: What is the performance of performance management? The management and employees have been slowly but visibly losing momentum. It is mainly because early designers focused more on performance measurement than strategy management. New designers should note that a performance management system is a "tool that is designed to assist you in executing your strategy, not crafting a new strategy” (Niven, 2005: 27).

(5) Fifth, we encountered some frustrating behavioral problems in the course of implementing the performance management system, the so-called gaming by employees to receive higher performance scores, resulting in undesirable consequences. Examples include:

① Selecting performance indicators that are easy to measure and/or quantify, particularly in the short-term,

② Setting the performance targets that are lower than they should be,

③ Doing less for the work that is not evaluated,

④ Omitting the data that may lead to unfavorable evaluation,

⑤ Selecting generous evaluators, and

⑥ Using rhetoric in the report.

Our experience indicates that:

(1) Performance measurement can work better when tasks are related to implementation, well-representative of one's work, less repetitive, and easily quantifiable;

(2) Performance measurement may not work when tasks are related to planning and/or administrative support; and

(3) Performance-based pay may not work as a motivation mechanism since gaming in performance measurement occurs more often in an organization where performance-based pay is higher.

Recent Responses

In order to respond to these new challenges and problems, the Lee Administration has continuously engaged in dialogue with experts and stakeholders to manage contradictions and dilemmas involved in the system. As a result, the current system is simpler focusing more on national agenda and more useful with less gaming. At the same time, the system is more cost-effective and better received by employees and citizens. Particularly in 2011 the Prime Minister's Office initiated a bold approach to make the system even better. The initiative includes more decentralization, less redundancy, more focus on long-term vision and mid-term strategic objectives, and more in-depth analysis for government-wide programs.

Improving the system is a never-ending task. Some lessons I'd like to share with you include:

(1) First, timely monitoring, rather than routine periodic evaluations, should be emphasized so that problems can be detected as early as possible and fixed in the most effective way.

(2) Second, the management should convince its employees that a performance management system is not a threat to them, but a support to enhance their capacity in the long-run. At the same time, top managers convince themselves that performance information solely is not sufficient to make a sound decision although it is an important source for better decision-making.

(3) Third, the management should encourage employees to re-assess the organization’s strategies so that the organization strategic capacity can be improved through performance management. At the same time, top managers should recognize not only those who performed well in the past but those who ask the right questions for the future, and count it in the individual performance scorecard.

(4) Fourth, performance management systems should be re-designed to promote collaboration and cooperation, rather than competition, within a department and across departments and agencies. At the same time, performance-based pay should be re-designed accordingly.

(5) Fifth, and most importantly, a new system should pay more attention to 'doing the right things' than 'doing the things right'. Yet, many performance evaluation systems do hardly count the effort to ‘do the right things’ although this requires more effort and leadership than 'doing the given things right'.

Implications for Developing Countries

Assessing the effectiveness of a performance management system and designing a new system reflect someone’s ideology. In Korea, performance management has evolved in a visible way although the current system needs more refinements.

As an internal control mechanism, performance management can evolve as a tool to build a competent and accountable government. Yet, advocates of performance management should prepare themselves for unresolved challenges and new ones in the process of adopting and implementing a performance management system.

I'd like to stress that performance management system is more than a measurement tool. It is a change initiative that must be carefully designed and implemented so that everyone in an organization comes on board and works toward improved results. However, the lack of communication and ill-understanding of why a change is necessary at this particular time would lead everyone in the organization to passively accept performance management.

South Korea is moving forward to build a more competent and accountable government by instituting an integrated performance management and evaluation system across the government. We believe that the new system can change public servants to enhance their capacity to serve the public better.

I'd like to welcome you to a long journey of building a good performance management system.

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