Measures of effectiveness for governmental organizations

For organizations whose objective is not necessarily the maximization of a financial quantity, there is little written in the economics and management literature about methods that quantify their effectiveness. Potential users of such methodologies are typically governmental organizations and agencies to whom Congress allocates funding periodically, but may also include many nonprofit organizations. Such research is importantly needed because government is no longer making outlay allocations on a merely historical basis, but is using as a criterion how effectively an organization uses its resources in meeting its objectives. In this paper we analyze the Maritime Safety Program of the US Coast Guard (USCG), which is responsible for monitoring the quality of vessels that sail in US waters, and present measures of effectiveness (MOEs) for the Program. We do this at two levels of activity: at an overall program level (Level I) and at a component activity level (Level II). Poisson models are used to construct the MOEs using data on maritime casualties (accidents) between 1990–1993 from the real-time Marine Safety Management System (MSMS) database maintained by the Coast Guard. A feature of the empirical methodology is the Bayesian imputation of missing data. The MOEs constructed here have at least four important uses. First, as the name suggests, they perform the function that financial quantities such as returns on equity or returns on sales perform for private-sector organizations – that is, they are indicators of efficiency. Second, they can be used as inputs into allocative decisions within the organization. For example, the Level II MOEs can be used as inputs into a programming problem that determines the optimal allocation of resources among component activities. Third, internal performance evaluation across USCG Programs or across Port Units (called Marine Safety Offices) can be based on their respective Level I MOEs. Fourth, and possibly the most important long-run consideration, MOEs provide the basis for beter regulation by the government. Without MOEs the nature of regulation is probably suboptimal. By adopting these MOEs as criteria, it will be easier for the government to redesign those aspects of its regulation of the Coast Guard which curtail incentives.