‘Frontier methods’ offer a powerful but accessible approach for measuring the efficiency of public sector organisations

EUROPP Blog of the LSE: “How can the efficiency of public sector organisations best be measured? Jesse Stroobants and Geert Bouckaert write that while the efficiency of an organisation is typically measured using performance indicators, there are some notable problems with this approach, such as the tendency for different indicators to produce conflicting conclusions on organisational performance. As an alternative, they outline so called ‘frontier methods’, which use direct comparisons between different organisations to create a benchmark or standard for performance. They argue that the frontier approach not only alleviates some of the problems associated with performance indicators, but is also broadly accessible for those employed in public administration….
However, despite their merits, there are some drawbacks to using performance indicators. First, they provide only an indirect or partial indication of performance. For instance with respect to efficiency, indicators will be single-input/single-output indicators. Second, they may provide conflicting results: an organisation that appears to do well on one indicator may perform less successfully when considered using another.
In this context, ‘frontier methods’ offer alternative techniques for measuring and evaluating the performance of a group of comparable entities. Unlike single factor measures that reflect only partial aspects of performance, frontier techniques can be applied to assess overall performance by handling multiple inputs and outputs at the same time. Specifically, Data Envelopment Analysis (DEA) and Free Disposal Hull (FDH) have proven to be useful tools for assessing the relative efficiency of entities….
At this point you may be thinking that the term ‘frontier methods’ sounds overly complex or that these techniques are only likely to be of any use to academic specialists. Yet there are a number of reasons why this interpretation would be incorrect. It is indeed true that DEA and FDH have been used predominantly by economists and econometricians, and only rarely by those employed in public administration. We should re-establish this bridge. Therefore, in a recent article, we have provided a step-by-step application of DEA/FDH to benchmark the efficiency of comparable public sector organisations (in the article’s case: public libraries in Flanders). With this gradual approach, we want to offer both academics and practitioners a basic grounding in more advanced efficiency measurement techniques….(More)”.