Funding a PAYG pension system: the case of Italy

Italy is characterised by a mature pay‐as‐you‐go social security system and by particularly adverse population projections. Given these trends, the social security contribution rate is expected to increase above its current high level. This hinders the development of employer‐provided pension funds and introduces a significant wedge between labour cost and earnings that discourages both labour demand and labour supply. Any proposal to reduce payroll taxes and to reform the system in the direction of partial funding has to cope with the state of Italian public finances. Italy has to comply with the Stability and Growth Pact that imposes constraints on budget deficit and debt trends. Using micro data from the Bank of Italy's Survey of Household Income and Wealth and official population projections, we estimate future employment trends under different demographic and macroeconomic scenarios and compute the cost of the transition. We show that it would be substantially reduced if positive effects on employment were induced by the payroll tax reduction.     

Performance measurement of pension strategies: a case study of Danish life cycle products

The Danish pension markets of life cycle products have expanded considerably since its introduction in the beginning of the millennium. The market is maturing and pensioners have the choice between a wide area of different products. It is therefore about time that financial insurance technology is developed to guide the performance measurement of available products. In this paper we develop a simple first version of such a method and we investigate life cycle products recommended on the web of the four biggest commercial Danish pension companies on one day in February 2007. All considered products are outperformed by trivial benchmark products with constant stock proportion over time. Our approach is the following: for each life cycle product we first find a trivial benchmark product with the same long-term risk and then we compare the long-term return of the two equivalent products. We primarily consider value at risk and tail value at risk as risk measures, but we also include a study where the fair value of an interest guarantee is used as risk measure. We consider both long-term mean returns and long-term median returns. We hope that our new method will be regarded as a first step towards a scientifically based ranking of the quality of pension products.     

Public sector reform implications for performance measurement and risk management practice: insights from Australia

In 2013, the Australian Public Service was subject to a process of governance, accountability and performance reform. The implications of these reforms for micro-level practices are unknown. The authors’ empirical findings show that the reforms developed in three stages, each of which has significant implications for embedding performance measurement and risk management within a broader management control system.     

Inside debt and firm risk-taking: Evidence from the UK pension reform

This paper provides new evidence on the relation between CEO inside debt and firm risk-taking by exploiting the change in the tax treatment of UK pensions following two pension amendments. The 2006 pension reform introduces the annual and lifetime allowance for UK pension schemes, significantly increasing income taxes associated with CEO inside debt. The 2011 allowance cut, which substantially reduces the annual allowance introduced in 2006, further increases income taxes on inside debt. We find that CEO inside debt, in the form of executive pensions declines after the 2006 reform while cash-in-lieu increases significantly. This effect is more severe after the 2011 allowance cut than the 2006 pension reform. UK firms appear to substitute away from pensions towards cash-in-lieu, where income taxes are less punishing. If the association between CEO inside debt and firm risk-taking is causal, we should observe a change of risk-taking after the decline of inside debt. Our results, which exploit the exogenous nature of the reforms, show that the decline of CEO pensions does not lead to any change in firm risk-taking. This result suggests that no causal relationship exists between CEO inside debt and firm risk-taking. Our results extend the inside debt literature, where empirical evidence is mainly documented in the US. Contrary to findings in the US, our evidence suggests that the use of CEO inside debt is motivated to minimise income tax rather than a tool to moderate firm risk.     

Unveiling the role of identity accountability in shaping charity outcome measurement practices

Internationally, charities are grappling with the challenges of measuring their service outcomes for accountability purposes. This study employs recent developments in institutional theory to examine the role of identity accountability in shaping these outcome measurement practices. Semi-structured interviews with staff and managers in two New Zealand charities are drawn on to understand their perceptions and experiences of outcome measurement. The findings reveal that charity actors engage in institutional work aimed at discharging both identity accountability and upward accountability via their outcome measurement practices. However, they face challenges in achieving and balancing these two forms of accountability. Policy-practice and means-ends decoupling result, creating the potential for mission drift and other unintended consequences of outcome measurement practices.     

A strategy framework for performance measurement in the public sector

This paper looks at a little-studied question: what are the strategic choices behind the selection and implementation of performance measurement practices in public sector entities? The paper presents a new strategy framework which provides a structured approach to the many options available for measuring performance effectively. The framework is primarily intended for large public sector organizations, such as municipalities, but will also be useful in smaller entities.     

Performance measurement and institutional processes: a study of managerial responses to public sector reform

Institutional aspects of performance measurement (PM) in public sector organizations are attracting increasing research interest. Only recently, however, has the literature on this topic recognized the pertinent critique of neo-institutional sociology (NIS) pivoting around its view of managers and organizations as primarily passive adaptors to change. This paper explores how the properties of institutional processes associated with recent reforms in the Norwegian health care sector impinge on the extent of pro-active choice exercised by senior management in the development of multidimensional PM reflecting the interests of a wider range of institutional constituencies. Addressing this issue, we draw on Oliver’s (1991) conceptual framework, based on a continuum of responses characterized by a varying degree of pro-active choice. The study thus provides a more detailed analysis of the managerial tactics in developing organizational PM than most prior research informed by NIS. We find support for several of Oliver’s hypotheses regarding the influence of institutional aspects, particularly those pertaining to the causes of the adoption of PM practices, the pattern in which these are diffused and the influence of constituency multiplicity and dependence, but also identify some areas requiring conceptual refinement in this respect.     

The use of performance measurement systems in the public sector: Effects on performance

We study the use of performance measurement systems in the public sector. We hypothesize that the way in which these systems are being used affects organizational performance, and that these performance effects depend on contractibility. Contractibility encompasses clarity of goals, the ability to select undistorted performance metrics, and the degree to which managers know and control the transformation process. We expect that public sector organizations that use their performance measurement systems in ways that match the characteristics of their activities outperform those that fail to achieve such fit. We test our hypotheses using survey data from 101 public sector organizations. Our findings indicate that contractibility moderates the relationship between the incentive-oriented use of the performance measurement system and performance. Using the performance measurement system for incentive purposes negatively influences organizational performance, but this effect is less severe when contractibility is high. We also find that an exploratory use of the performance measurement system tends to enhance performance; this positive effect is independent of the level of contractibility. The effectiveness of the introduction of performance measurement systems in public sector organizations thus depends both on contractibility and on how the system is being used by managers. These findings have important implications, both for practice and for public policy.     

Exploring the relationship between strategic performance measurement systems and managers' creativity: the mediating role of psychological empowerment and organisational learning

This study explores whether strategic performance measurement systems (SPMSs) are linked to managers' creativity through two mediating variables—organisational learning and psychological empowerment. Using data collected from 92 senior production managers in Australian manufacturing organisations, the study tests these links using a partial least squares structural model. The results from the structural model indicate that SPMSs are indirectly related to the managers' creativity through organisational learning and psychological empowerment. The study also finds that organisational learning is both directly related to creativity, and indirectly related to psychological empowerment. Further, the potential implications for empirical research are discussed.     

Measuring measures: introducing performance measurement in the Dutch health care sector

The Dutch government has sought to increase transparency in the performance of medical institutions. For hospitals this has presented three challenges for performance measures, each related to gaining authority and support from all those (public and private) bodies already involved in quality assurance. The experience raises issues about the speed of implementation, scope, burden and impact on hospital image of performance measurement regimes. It also suggests a tension between market-based and other mechanisms used to ensure quality.     

Measuring public value: a conceptual and applied contribution to the debate

Countries facing austerity measures need to create public value. Academics and practitioners have been discussing the ways in which public value can be created, managed and measured. This paper contributes to this conversation by proposing a public value measurement model. An Italian case study is presented to demonstrate the feasibility of the model and the organizational implications when public value measures are available to public sector managers, politicians and the public.     

Examining the process of performance measurement system design and implementation in two Italian public service organizations

In the last two decades, the adoption of new public management (NPM) practices in the public sector has increased as public sector organizations seek to improve efficiency, effectiveness and public accountability. We present case study findings of a NPM initiative to implement balanced scorecard (BSC) performance measurement systems in two Italian public sector organizations. This study considers the question of whether the BSC development process can be effectively translated into the public sector context. Our findings highlight the importance of aligning the development of performance management systems with a greater understanding of the internal and external environment of public sector organizations. Our results further emphasize the significant role of emergent stakeholders and management culture for the success of NPM performance management initiatives.     

Impact of the interactive and diagnostic uses of performance measurement systems on procedural fairness perception,cooperation and performance in supply alliances

We examine the effects of interactive and diagnostic uses of performance measurement systems (PMSs) on two behavioural factors (procedural fairness perception and cooperation) in inter-firm alliances. We further investigate whether the two behavioural factors mediate the relationship between PMS uses and alliance performance. We find that both interactive and diagnostic uses of PMS are significantly related to procedural fairness perception but only the interactive use is significantly related to cooperation. The relationships between the two uses of PMS and alliance performance are serially mediated by procedural fairness perception and cooperation. These findings contribute to management accounting studies in inter-firm alliances.     

Together we measure: Improving public service outcomes via the co-production of performance measurement

Not-for-profit organizations (NFPs) aim to deliver public services and achieve outcomes for their beneficiaries. However, little attention has been given to how NFP professionals engage with beneficiaries to develop the performance measures that inform service improvement and accountability. Our findings illustrate how a co-production approach to performance measurement can enhance the meaningfulness of outcome measures, hence supporting service improvement and facilitating ‘collaborations for accountability’ between NFPs and their beneficiaries.     

Performance measurement systems in higher education: How levers of control reveal the ambiguities of reforms

This paper focuses on the introduction of new performance measurement system (PMS) for measuring teaching performance in Universities. The adoption of such PMS should prompt significant changes in existing control processes, but the goals of reform do not automatically translate into the desired organisational responses. Given the impact of PMS on management controls, the nature of such ambiguities may be better investigated using a framework that allows management control systems (MCS) to be taken in account. This paper investigates key actors' perceptions regarding the introduction of PMS through the lens of the levers of control (Simons, 1995, 2000). A qualitative analysis is conducted on interviews held with Italian university teaching managers and heads of programmes to examine the ambiguities arising from the implementation of a PMS.Several ambiguities emerge, both within and between the levers analysed, suggesting some reasons for the (partial) ineffectiveness of PMS reforms. In particular, the belief systems lever is crucial in making reforms acceptable, bureaucratic procedures are important in the diagnostic control systems lever, and performance indicators operate as a boundary system lever. Our findings show that administrative and academic actors perceive the interactive control capacity of PMS differently.     

Wall Street''s contribution to management accounting: the Stern Stewart EVAfinancial management system

EVA^®is a variant of residual income marketed byStern Stewart & Co., a New York consulting firm, with the purpose of promoting value–maximizing behaviour in corporate managers. This paper reviews the EVA system in the light of this purpose. First, it outlines the rationale for the use of residual income in ‘value-based management’, highlighting the potential shortcomings of residual income as a single-period performance indicator. Second, it considers the adjustments to GAAP-based accounting advocated by Stern Stewart in order to produce a more economically meaningful version of residual income (EVA) which might serve as an effective indicator of single-period performance. Third, it examines the Stern Stewart approach to the setting of EVA benchmarks. Finally, it reviews the logic behind the use of the ‘bonus bank’ to separate the award of EVA–based bonuses from the payment of such bonuses.     

Transformational change and the vacuum of performance measurement: How a story of success became a failure

Some local government organisations stand out in terms of their capability to adopt and use management accounting innovations and become a model for those struggling with issues such as performance measurement (PM). But what happens to the innovations if the organisation is forced into transformational change? This longitudinal case study is based on the theory that the use and impact of PM is influenced by (a) its contractibility and (b) how the performance management systems in place are configured and used. One conclusion is that transformational change can result in a vacuum of PM, even with a high degree of contractibility.     

Using Relational and Transactional MCSs to Manage the Delivery of Outsourced Public Services: Evidence from Twelve Cases in the USA

The successful management of the purchaser–provider relationship is essential for the effective delivery of public services, and entails the use of both transactional and relational approaches. We herein analyse the degree and complementarity of transactional and relational management control systems in the management of purchaser–provider relationships for the successful delivery of public services using evidence from 12 US case studies. We demonstrate that transactional and relational management control systems are controlled differently in order to improve contracting efficiency. We also show how a combination of these management control systems offers a framework for structured public accountability and service flexibility.     

Performance measurement in universities: ambiguities in the use of quality versus quantity in performance indicators

Performance measurement (PM) is now common in Western universities. This is also the case in Finland, where a new funding scheme was implemented to ensure that quality was included in universities’ PM. However, this paper shows that the quality indicators in use are, in practice, quantitative. The paper is based on a large survey and has implications for university PM systems in Finland and internationally.     

Patents and the performance of technology firms: Evidence from initial public offerings in Germany

The objective of this study is to analyze the relationship between innovation and performance for German firms that went public at the “Neuer Markt” during the period from 1997 to 2002. In the empirical analysis we investigate in particular whether initial public offerings (IPOs) with more or higher quality patents outperformed IPOs with lower quality or no patented technology. For this we measure the impact of patents on underpricing and long-run performance and explain the magnitude of these valuation effects with the Fama–French value and growth factors, with patent-specific variables such as the number of IPC-classes, family size, the number of backward and forward citations, as well as with industry variables. The empirical evidence suggests that patents are a reliable indicator for the success and the short- and long-run performance of start-up technology firms that went public and that the valuation effects are more pronounced for higher quality patents.