Organizational Performance: Measurement Theory and an Application: Or, Common Source Bias, the Achilles Heel of Public Management Research

Abstract

The measurement of public organizations’ performance is a central issue in public administration both in the U.S. (Moynihan 2008) and numerous other countries (Pollitt and Bourckaert 2000). Missing in the rush to performance appraisal and performance management is any effort to tie empirical efforts to the extensive literature on measurement theory (Ghiselli et al. 1981; Shultz 2005; Hand 2004). This paper uses measurement theory to assess the potential problems in measuring organizational performance. It deals with both subjective and data-based measures as well as measures internal to the organization and those imposed by external stakeholders. Because organizations can be evaluated on multiple dimensions of performance (Boyne 2002), the paper also illustrates how adding dimensions multiplies the number of technical issues that need to be resolved. The paper also provides an illustration of the insights of measurement theory by an analysis of performance indicators for several hundred public organizations based on an original survey conducted in 2009. The empirical illustration shows three internal perceptive measures relate to three external data-based measures of performance and the factors that lead to greater divergence of the measures from each other. These empirical results along with the theoretical discussion will then be used to provide guidelines for the assessment of organizational performance for both scholars and practitioners.