Principles for the Performance Management of Public Employment Services

In the field of public employment services (PES), performance can be measured primarily in terms of employment outcomes - such as the employment rate, unemployment rate and earnings - achieved by the clients of each local employment office or employment service provider. An increasing number of OECD countries now have performance management systems in place within the national PES or under nationwide or localized subcontracting arrangements. the principal in these systems needs to renew or discontinue contracts with service providers according to the estimated net impact of their services, i.e. gross outcomes relative to a “benchmark” or “target” level, which will vary according to local-labor-market and client-group characteristics. These benchmarks can be explicitly estimated using econometric methods, but they can also be generated automatically under an institutional set-up that ensures that multiple service providers are handling comparable client groups on equal terms. An alternative contracting model involves paying providers the actual value of the summary gross outcome measure but with lump-sum co-payments, which are set to ensure that no large economic rents arise. as various principles are better understood and operational systems are developed, explicit performance management arrangements may increasingly outperform traditional hierarchical management and ad hoc management-by-objectives approaches.