Linking Performance Measures to Resource Allocation: exploring unmapped terrain

Abstract

This article examines how (and whether) particular types of institutional performance measures can be beneficially used in making resource allocation decisions. An analysis of different kinds of information‐driven funding approaches is first presented, which distinguishes various purposes of performance measures and proposes several policy trade‐offs that must be taken into consideration in designing information‐driven approaches to resource allocation. Among the former are pure accountability, informing policy, leveraging improvement and informing consumer choice. Among the latter are the ‘intended audience’ of the measures, whether funding is positively or negatively related to results, the level of prescription involved in the linkage between results and allocation, and the timing of allocation. Specific technical features of different kinds of performance measures are then examined, with particular attention paid to their varying appropriateness for informing funding decisions. A principal conclusion is that only easily verifiable ‘hard’ statistics should be used in classic ‘performance funding’ approaches, though data such as surveys and the use of ‘good practices’ by institutions may indirectly inform longer‐term resource investments on a periodic basis.