1. The document discusses performance measurement models implemented in Indonesia following its decentralization in 2001. It explores challenges with current central-government driven models. 2. A nested model is proposed that integrates three spheres of evaluation: financial/budget performance, governance performance, and development performance. This aims to make evaluation more attainable and useful for local governments. 3. The paper also discusses lessons learned and suggestions for an effective process to implement the nested performance evaluation model, including collaborative efforts between central and local governments.

1. Assessment of Local Governance and Development Performance
in Indonesia:
Current Models, Challenges and Future Perspectives1
Dr. Astia Dendi2
Abstract
This paper explores the current approach and tools of performance
measurement implemented by the government of Indonesia in the
decentralized governance context. Following the 1997’s financial crisis,
Indonesia embarked on implementing the so-called “Big Bang”
decentralisation policy which actually began in 2001. It has led to the
devolution of authorities to provincial and local governments. Thus, these sub-
national governments have more opportunities and responsibilities to develop
their regions according to local needs and people’s aspiration involving the
private sector and civil society organizations. Within the framework of national
decentralization and an increasingly competitive global context, sub-national
governments have made tremendous efforts toward the provision of public
services, to achieve sustainable economic growth and reduce regional
disparities and poverty. However, the implementation of decentralisation
policy has not always been a smooth process nor has it effectively generated
all desirable changes and impacts. The current shortcomings call for a better
policy, practical tools and systemic capacity building for performance
management.
A long lasting debate at policy and implementation levels has been on
efficiency, applicability and comparability of the different approaches and tools
for local governments’ performance assessment introduced by the central
government agencies including by the Ministry of Finance, the Ministry of
Home Affairs and the Ministry of Administrative Reform as well as the Ministry
of National Development Planning (BAPPENAS). It can be concluded that the
current models of performance assessment in Indonesia overwhelm the local
governments rather than stimulate and capacitate them to enhance their
learning process, strengthen their capacity for policy formulation and strategy
alignments in addressing local/ regional issues and emerging global
challenges. Moreover, it turned out that the central government-driven models
of performance assessment were notably rich in their number of indicators
but rather poor in term of attainability or accessibility of verifiable data in cost-
effective ways. We suggest a nested model of performance assessment that
1
A paper submitted to International Association of Schools and Institutes of Administrations (IASIA)
for a presentation in the coming congress entitled “Public Sector Strategy for Overcoming Growing
Global Inequality, to be held in Bali, Indonesia from 12-17 July 2010.
2
Dr. Astia Dendi, Senior Advisor of Decentralisation as Contribution to Good Governance (GTZ
DeCGG). Kementerian Dalam Negeri Republik Indonesia, Jl. Meredeka Utara No.7 Jakarta.
Telephone +62 21 351 1584; Fax +62 21 386 8167; Email: Astia.Dendi@gtz.de. The perspectives
presented in this paper do not represent official views of Deutsche Gesellschaft fuer Technische
Zusammenarbeit (GTZ) GmbH.

2. integrates three spheres of performance evaluation namely financial/budget
performance, governance performance and development performance. In
addition, the paper discusses lessons learned and suggests process and
steering structures toward effective implementation of the nested model of
local governance/ development performance evaluation.
Keywords: Good governance, Indonesia, local governance, performance
assessment, financial performance, governance performance,
development performance.
1. Introduction
1.1 Background
Following the financial crisis, Indonesia since 1999 embarked on
implementing a decentralisation policy that was called “Big Bang” by the
World Bank due to its radical shift in authority from national to subnational
government. Implementation actually began in 2001 and has led to the
devolution of authorities to provincial and local governments. Indonesia is a
unitary state that presently consists of 524 autonomous regions (33
provinces, 398 districts, and 93 municipalities (MoHA, 2009). The sub-national
governments have more opportunities and responsibilities to develop their
regions according to local needs and people’s aspirations, involving the
private sector and civil society organizations. Within the framework of
decentralization and an increasingly competitive global context, central and
sub-national governments have made tremendous efforts towards improved
provision of public services, achievement of sustainable economic growth
and reduction of regional disparities and poverty. However, the
implementation of the decentralisation policy has not always been a smooth
process nor did it effectively generate all desirable changes and impacts.
Some challenges remain whichamong others include the continuation of
bureaucratic and governance reform along with fiscal decentralization and
enhancement of cross-sectoral and vertical policy coherence.
Meanwhile, the National Mid-Term Development Plan (RPJMN) of 2010-2014
has put strong focus on the need to establish better inter-sector coordination
and national-regional/local interaction to pursue economic development and
people’s welfare improvement (Agenda I). Along with that, the RPJMN 2010-
2014 also emphasizes the improvement of governance (bureaucratic and
governance reform) which also calls for a more sytematic and holistic
implementation of performance management including planning,
performance-based budgeting and performance measurement.
Policy makers and some prominent civil society organizations in Indonesia
have increasingly considered performance measurement as a management
instrument to enhance the quality of services produced by public sector
agencies. Furthermore, it is believed that an appropriate system of
performance management would promote organizational learning and
strengthen customer-orientation among public agencies. One of the
2

3. fundamental challenges, however, has been the establishment of a coherent
regulatory framework, followed by effective collaborative efforts to improve
the performance of public agencies at all levels.
1.2 Scope and Structure of the Paper
This paper explores the current approach and tools of performance
measurement implemented by the government of Indonesia in the
decentralized governance context. We analyze and discuss the underlying
concepts and legal frameworks of performance measurement applied in
Indonesia. Prospects and challenges facing the implementation of outcome-
focused performance measurement based on day-to-day observations during
five recent years as well as local stakeholders’ perspectives are discussed.
The paper concludes by addressing some outstanding issues and action-
oriented recommendations to make the outcome-focused performance
measurement work better.
2. Performance Measurement System in the Public Sector: A
Theoretical Perspective
2.1 Means-Ends Structure and Performance Measurement
Governments in developing countries, including the Indonesian government,
have increasingly drawn attention to the application of performance
measurement along with the notion of bureaucratic reform and good
governance practices. In the public sector context, performance measurement
is considered as a connector between information and management decision-
making for the benefits of the public. By using valid and reliable instruments,
performance measurement will provide elected officials with sound
information and profound understanding on policy outcomes and constraints
and, thus, will drive adjustment or alignment of policy or programme to create
greater vertical and horizontal coherence through evidence-based policy
making and programme planning. A reliable performance measurement will,
therefore, enhance the efficiency of resource use. Furthermore, it will
enhance effectiveness (achievement of the planned policy or programme
outcomes), transparancy as well as vertical and horizontal accountability.
However, stakeholders lack a common understanding or even a “persistent”
debate on the meaning and design of reliable and cost effective instruments
to measure public sector performance.
Indeed, the framework of performance measurement can be traced back to
the Logical Framework concept (means-ends structure) introduced by
USAID in the late 1960s (Dale, 2003). The logical framework helps
development planners to structure project strategy along logical effect-chains
(linear means-ends relationship) from transforming inputs into outputs toward
specified goals. In addition, the logical framework addresses another
dimension of development strategy namely indicators and achievement
3

4. targets (performance measures) which generally consist of output, purpose
and goal to be monitored and evaluated.
In the context of regional development, for example, Dale (2003) introduces
an extended means-ends structure in a logical framework for planning and
monitoring [or performance measurement]. The model follows the logical
cause-effect chains in line with the “convention” of development science.
Dale’s notion of logical framework has the following means-ends structure:
“Activities (with input indicators)–Outputs–Immediate Objectives–Effect Objectives–
Development Objectives”
Dale’s means-ends structure is clearly an objective-centered model. He
maintains the argument that any development effort should ultimately bring
about improvement of the quality of people’s life. Therefore, development
programmes or services should focus on creating benefits for specified
beneficiaries (target groups) as well as impacts for other people (broader
target population). In this perspective, Dale (2003) furthermore argues that
the output, namely the products or services generated through utilization of
inputs in implementation tasks (activities), tell nothing about benefits for the
people; therefore development should go beyond outputs and the means-
ends structure should show specific and unambigious immediate changes
toward desirable benefits in terms of improvement in quality of life of people.
Furthermore, it is noticable that Dale (2003) differentiates objectives into three
hierarchies (means-ends structure) namely the immediate objective, effect
objective, and development objective. The notion of immediate objective
refers to immediately intended results of the outputs for specified
beneficaries. The notion of effect objective refers to direct and unambigious
intended improvements for intended beneficaries as the direct effect of
immediate objective achievement. By contrast to these objectives, the term
development objective refers to the overall intended impacts of any
planned development intervention or service; this objective should clearly
express benefits in terms of some improvement in the quality of life of people.
In contrast to Dale’s result chains (means-ends structure), GTZ introduced a
revised result chains model recently (Sckeyde and Wagner, Eds., 2008: page
8) as follows:
Inputs – Activities – Outputs – Objectives –Indirect Results
GTZ defines outputs as short term results of the activities in terms of
equipment, materials or services and these are available for use by other
actors (Sckeyde and Wagner, Eds., 2008: page 7). The notion of ‘use of
outputs’ expresses the change process that intermediaries and target groups
undergo in order to achieve specified objectives. In this perspective, the
objective is defined as the direct results among intermediaries and target
groups with clear causal link to activities and thus can be quantitatively
attributed to an individual measure (Sckeyde and Wagner, Eds., 2008: page
7). The notion of ‘indirect results’, however, can no longer be causally and
quantitatively attributed to an individual measure; these results depend on
4

5. inputs from many other actors whose share in the overall change may be
plausibly demonstrated but can not necessarily be isolated or quantified
(Sckeyde and Wagner, Eds., 2008: page 7).
Based on these two models, Dale (2003) and GTZ (Sckeyde and Wagner,
Eds., 2008) and the given examples, some common perspectives can be
identified. The first is, that the ‘output’ is produced within the service
provider’s system while the further change process and results/ objectives
occur in the ‘client system’ (intermediary and target population). Secondly,
Dale’s notion of ‘immediate objective’ appears closely compatible with
GTZ’s notion of ‘use of output’. Thirdly, both models share the principle that
the means-ends structure should clearly and unambiguously specify
intermediate changes/ improvements that clarify how outputs will make
significant effects toward realization of intended benefits for the specified
target population. The term ‘specific and unambiguous’ changes in both
models call for appropriate selection and formulation of clear and measurable
indicators of the intended changes/benefits. The notion of ‘measurable
indicators’, however, should not be interpreted as merely quantitative
indicators but also include qualitative indicators or a combination of both.
In contrast to these two models, some practitioners develop other models
although theyshare the convention of “if-then” logic in the academic
literature. Schmidt (2009:32), for example, introduces the following means-
ends structure: “Input – Outcome – Purpose – Goal”. Schmidt’s notion of
outcome refers to specific results that a project team must deliver by
managing inputs, while the purpose refers to the anticipated impact of doing
the project (change expected from producing outcomes). Furthermore,
Schmidt (2009:32) defines Goal as the high level, big-picture strategic or
program objective to which the project contributes.
Furthermore we explore how scholars and practitioners define performance
measurement. We recognized that there exist different perspectives,
meanings, and scope of what the performance measurement is about
(Mardiasmo, 2002; Hatry, 2006; Jantz, 2008). Hatry (2006: page 3) defines
performance measurement as regular measurement of the results (outcomes)
and effeciency of services or programs. Furthermore, the Hatry’s notion of
service effeciency differ from the widely adopted concept of output-based
effeciency (input-to-output ratio). In contrast, Hatry suggests outcome-based
effeciency indicator concept. For years, scholars share and maintain
arguments that the input-to-output ratio as indicator of effeciency is risky for a
simple reason that, the effeciency can be increased by reducing the quality of
output. Instead of using “cost per client served”, for example, it would be more
accurate to use “cost per client whose condition improved after services” as
efficiency indicator (Hatry, 2006). The first ratio is an output-based while the
second ratio is an outcome-based efficiency indicator.
Furthermore, the emphasis on regular measurement of progress toward
specified outcomes, Hatry argues, is a vital elements of customer-oriented
process at managing-for-results to ensure maximum benefits and minimum
negative consequences for customers of services or programs. Furthermore,
5

6. Hatry (2006) argues that beside regular tracking for budget purposes,
managers in public sector need more frequent outcome information to assess
the success of their programm activities, identify significant problems to
achieve the specified outcomes as well as to motivate personnel to strive for
continues service improvement. However, performance measurement has
another vital goal, namely to assess and ensure equity. Hatry (2006)
maintains argument that a well-designed measurement system will enable
agency managers to assess the fairness of services or programs and adjust
them appropriately.
More recently, GTZ Sector Network “Governance Asia” (2010: 7-8) defines
performance measurement
“... as measurement on recurring basis of the outcomes or results and
effectiveness of services or programs. The operative term in this instance is
recurring. Consistent measurement or advancement toward specific outcomes
is a critical part of all management efforts to impove results. An important
aspect of performance measurement in local government is its customer
orientation. Local government focuses on increasing benefits and decreasing
negative consequences. This can refer to citizens who receive direct services
or individuals or business affected by policy decisions or service delivery...”
From a system perspective, Mardiasmo (2002) defines performance
measurement as an assessment tool which assesses strategy implementation
through financial and non-financial measures. In addition, Mardiasmo (2002)
emphasizes that budget is one of the financial measures used to assess
strategy implementation; it is a primary instrument of many function of
decision which is used as a tool to achieve organization goals.
Jantz (2008) defines performance measurement as regular collection,
recording and evaluation of performance data. With reference to Hood (2007)3
he reveals two different performance measurement systems:
1. Target system that measure current performance of a period (using
previously defined performance metrics);
2. Rankings that measure current or past performance in relation to other
comparable entities (often known as benchmarking). The objective
here is to inform customers about entity’s performance or to provide
political decision-makers with starting points for increasing
performance.
Scholars and practitioners recognize that performance measurement is a
management tool to maximize success. In line with this perspective, the Joint
3
Christopher Hood. 2007. Public service management by numbers: Why Does it Vary?
Where Has it Come From? What are the Gaps and the Puzzles? In Public Money and
Management, April 2007 Vol 27 (2) 95-102.
6

7. National Performance Management Advisory Comission of United States of
America and Canada (NPMAC, 2009) defines performance management as4,
“...is an on going, systematic approach to improving results
through evidence-based decision making, continous
organizational learning, and a focus on accountability for
performance...”
Along with this definition, the Commission elaborates that performance
management is integrated into all aspects of an organizations’s management
and policy-making processess and transforms an organization’s practices so
that they are focused on achieving improved results for the public.
Performance measurement is part of a broader system of performance
management. In public institution context, performance management
consists of systematic recording and tracking of performance of public
orgnanisations in order to promote a continous improvement process.
Furthermore, we uncovered from academic and practitioners literature that
performance measurement and reporting are critical elements of
performance management; however, they are insufficient to promote
organization’s learning and improved outcomes for public (Thiel and Leeuw,
2002; Dale, 2003; NPMAC, 2009). Thus, the notion of performance
management, goes beyond measurement and reporting of organization’s
performance; it attempts to systematically use performance data as well as
other tools to promote continous learning for improvement, and strengthen
organization’s focus on results (Sckeyde and Wagner, Eds., 2008; NPMAC,
2009; Kompas, 20105)
2.2 Types of Indicator in Performance Measurement System
Boyne (2002) reports that scholars and practitioners generally draw
performance indicators upon two corresponding but not entirely consistent
models of organizational performance that contain a sequence of service
production process. The first model links economy6, efficiency and
effectiveness (3Es model) as key dimensions to measure organization
performance (Boyne, 2002: page 17). The second model (Boyne 2002: page
17) is a linear structure of inputs-outputs-outcomes (IOO model). The latter
has been discussed under Section 2.1 taking the Dale’s and GTZ models as
examples.
4
National Performance Management Advisory Commission. 2009. A Performance
Management Framework for State and Local Government: From Measurement to
Management and Improving, www.gfoa.org/.../PMCommissionFrameworkPUBLIC-REVIEW-
DRAFT.pdf
5
Kompas News, 6th of May 2010 page 4: “Komisi II Pertanyakan Pemda”.
6
The term ‘economy’ (Boyne, 2002) is frequently equated with the level of spending on a
service, but it is more accurately defines as the cost of procuring specific service inputs of
given quality.
7

8. In the 3Es model, the term ‘economy’ (Boyne, 2002) is frequently equated
with the level of spending on a service, but it is more accurately defined as the
cost of procuring specific service inputs of given quality (for example
premises, staff, and equipment). However, this notion of economy is not
without questions and it involves political issues. While the notion of economy
leads authorities to seek to minimize the price paid for inputs or production
factors, there is no common perception in literature whether squeezing the
wages for labours or civil servant is good or bad performance. Moreover,
Boyne (2002) maintains the argument that high or low spending in it reveals
nothing about service standards, or the success or failure of local authorities.
In contrast to economy, economists define efficiency in term of ‘technical
effeciency’ and ‘allocative efficiency’ (Boyne, 2002). The first refers to cost per
unit of output, while the later refers to the responsiveness of services to public
preferences. However, the 3Es model ususally adopts the notion of ‘technical
effeciency’ (Boyne, 2002).
The concept of effectiveness refers to the achievement of the formal
objectives of policy or services (Boyne, 2002; Dale, 2003; Sckeyde and
Wagner, Eds., 2008).
Recent academic and practitioners literature (Boyne, 2002; Dale, 2003;
Sckeyde and Wagner, Eds., 2008; Dendi et al., 2010), however, informs that
public organizations increasingly adopt a model with broader criteria or
organizational performance. This model corresponds to the means-ends
structure discussed in Section 2.1. However, the fundamental structure of the
model involves “IOO” (Input-Output-Outcomes) indicators. As well, the “IOO”
model embraces all elements of the 3Es model (inputs include expenditure,
efficiency is the ratio of outputs to inputs, and outcomes include formal
effectiveness). More over, the “IOO” model (Boyne, 2002) or its
corresponding extended models (Dale, 2003; Sckeyde and Wagner, Eds.,
2008; Dendi et al., 2010) not only make the “implicit” from the 3Es model to
“explicit”7, but also emphasis to adopt both quantitative and qualitative
dimensions of performance along with equity or fairness criteria. The equity
or fairness of service provision can be assessed, for examples, by the
distribution of outputs and income by gender, age, race, and geographical
areas (Boyne, 2002).
Performance measurement system in Indonesia adopted an extended “IOO”
model as stipulated among others in Law 25 of 2004 regarding National
Development Planning System, Government Regulation (GR) 39 of 2006 on
Supervision and Evaluation of Development Plan Implementation, Decision of
the Head of State Administration Institute (LAN) 239/IX/6/8/2003 on guidelines
of performance reporting for governmental agencies, and Government
Regulation 6 of 2008 on Guidelines of Evaluation of Local Governance
7
Readers interested to further explore conceptual advantages and disadvantages of the
“IOO” model can refer to Boyne (2002: page 18).
8

9. Implementation. The model involves a set of performance indicators namely
Input, Output, Outcome, Benefit, and Impact.
From academic and practitioners literature we identified that different
performance measurement system used different sets of indicators reflecting
different scope and focus of performance measures. OECD (2009: page 32)
recognizes four categories of performance indicators, namely:
• Input measures: reveal what resources (e.g. people, money, and time)
are used in what amounts to produce and deliver goods and services;
• Process measures: reveal the way in which activities are undertaken
by a programme or project with the resources described;
• Output measures: capture the goods and services activities produced
(e.g. number of Small and Medium Enterprises served, kilometres of
road built);
• Outcome measures: capture the dimension that is expected to
change as a result of an intervention (policy, programme, or project)
and the outputs produced.
GTZ Sector Network “Governance Asia” (2010) recognizes three categories
of performance incdicators consistent with the GTZ means-ends structure
(Sckeyde and Wagner, Eds., 2008) but not explicitly consistent with the
OECD’s notion of performance indicators, particularly in terms of process
indicators:
• Ouput-oriented indicators: these indicators focus on the direct output
of administrative actions Moreover, the primary relation of output
indicators is with the input. Thus, output indicators always refer to
efficiency and do not capture the notion of effectiveness;
• Outcome-oriented indicators: These indicators attempt to establish a
relation between the effects of political decision making and
subsequent activities. The outcome may include intended as well as
non-intended effects and, therefore, outcome-oriented indicators refer
to effectiveness;
• Process-oriented indicators: these indicators attempt to capture
quality in a wider sense.
Furthermore, we observed and found in literature (Boyne, 2002; LGSP, 2009;
Dendi et al., 2009) that In practice, however, the “IOO” model remains
vulnerable to inappropriate orientation on quantitative input and output
measures of performance. We further discuss this issue in the sections to
come.
9

10. 3. Performance Measurement System in Decentralized Indonesia
Performance measurement in Public sector has multiple dimensions. In
Indonesia there exists numerous public sector performance measurement
instruments institutionalized or enacted through Government Regulation
(GR). Table 1 presents a comparative summary of performance reporting and
measurement instruments currently applied in Indonesia. We focuse on four
performance measurement and evalution instruments.
The first is LAKIP (Annual Performance Accountability Report of
Governmental Institutions). It began effective in 1999 according to
Presidential Instruction Number 7 of 1999. It was then consolidated through
the operational guideline issued by the State Administration Agency
(Decision 239/IX/6/8/2003). It was the first attempt to establishing a
performance accountability system in Indonesia (Ind. SAKIP-Sistem
Akuntabilitas Kinerja). It relies on self-assesment approach in performance
measurement and reporting to ensure that individual governmental agency
comply with the established operating procedures and standards (process
indicators) and attempts to strengthen result-orientation (output and outcome
indicators) among governmental agencies in any development intervention or
service. While the process indicators refer to the norms, standards and
procedures applied in the Indonesian administration system, the results
indicators refer to performance indicators set up by government agencies in
their strategic plan and action plan documents. Conceptionally these
strategic and action plans must be coherence with the national mid-term
development plan.
The second instrument is the Evaluation of Implementation of Regional/ Local
Governance (EPPD- Evaluasi Penyelenggaraan Pemerintahan Daerah). The
EPPD pursues a number of objectives, namely: (i) assess the performance of
sub-national governance in an attempt to increase governance performance
according to the principle of good governance; (ii) assess regional/ local
capacity in achieving the specified objectives of regional autonomy, namely
improvement of people’s welfare, improvement of public service quality and
regional competitiveness among others; and (iii) monitor the progress of
establishment of soft and hard infrastructure for governance (institutional,
infrastructure and human resources) in the newly established autonomous
region. To pursue these objectives, the EPPD adopted three different
performance measurement modules. The first module, namely the evaluation
of sub-national (regional/ local) governance performance (EKPPD), refers to
the first objective of performance assessment (EPPD). The second module,
namely evaluation of capacity to execute regional autonomy performance
(EKPOD), refers to the second objective of performance assessment. The
EKPOD, however, will be executed only in regions graded as poor
performance for three consecutive years. The third module, namely
evaluation of the newly established autonomous region, refers to the third
objective of performance assessment. In this paper, however, we discuss
mainly the first module namely the EKPPD.
10

11. Furthermore, Government Regulation (GR) 6 of 2008 defines “the
performance of implementation of local governance” as results of
implementation of local governance functions measured through input,
process, output, results and benefit/ impact indicators. In line with this
definition, EKPPD is defined as a systematic process of collection and
analysis of governance performance data using performance measurement
system. The EKPPD sets two arena of performance assessment, namely the
elected policy makers (policy making level) and implementing agencies at
povincial as well as at district/ municipal levels. Furthermore, the performance
assessment for policy makers involves thirteen (13) dimensions with 63
governance-related key performance indicators in total for provincial level,
and 74 indicators for district/ municipal level (more detail in Table 2). These
dimensions, among others, include public order; coherency between regional
and national policies; effectiveness of relationship between regional/ local
government and the regional/ local legislative council; effectiveness of
decision making process by the provincial/ local legislative council;
effectiveness of decision making proces by the Head of Region ; Compliance
to the regulations and standards; transparency; and innovation in
governance. Meanwhile, the performance assessment for implementing
agencies involves nine (9) dimensions with a total of 151 and 174 key
performance indicators for provincial and district/ municipal level respectively.
The third instrument is EPRPD (Evaluation of Sub-National Development Plan
Implementation). It includes assessment of inputs-outputs relation and
realization as well as achievement of outcomes (including benefits/ impacts)
of development programs or services using the regional (province) and local
(district/ municipal) budgets. Indeed, article 51 of GR 8 of 2008 necessitates
elaboration of Ministrial Regulation for operational guidelines of EPRPD.
However, that regulation has not yet been prepared. The leading agency for
EPRPD at national level is the Ministry of Home Affairs. At provincial level, the
Head of Provincial Development Planning Board is in charge of conducting
the EPRPD. Similarly, the Head of Local Development Planning Board is in
charge of conducting the EPRPD at district/ municipal level.
The fourth instrument refers to the supervision and evaluation of national
development plan implementation (Ind. PEPRP) according to Law 25 of 2004
and GR 39 of 2006. It focuses on programs financed through national budget
including programs financed through deconstration and co-administration
schemes. The leading agencies of PEPRP at anational level is the State
Ministry of National Development Planning (BAPPENAS). It involves quarterly
progress monitoring, evaluation of the implementation of annual plan of
Ministries/Non-Ministerial State Institutions, and evaluation of the
implementation of mid-term (five years) development plans of Ministries/
Non-Ministerial State Institutions. Both progress monitoring and evaluation of
annual plans were done quarterly, while the evaluation of mid-term
development plans must be conducted at least once during the five-year
implementation period, latest 1 year before the end of period. The mid-term
development plan evaluation focuses on measuring outputs, outcomes,
11

12. macro-economic framework condition/ impacts as specified in the mid-term
dvelopment plan documents.
Table 1: Overview of Instruments of Performance Measurement for Central
and Sub-National Governments
Instrument Leading Agency Indicators Remarks
and Arena of and Particular
Asssessment Legal Base
Outcome
Process
Benefit/
Output
Impact
Input
LAKIP Ministry of Civil yes yes yes <yes <yes < yes denotes
All central level Service and that although
and sub-national Bureaucratic conceptionally
Reform; the indicator
level
governmental Presidential must be
institutions. Instruction Number reported, we
lack the
7 of 1999 and the
operational guideline evidence that
from State these indicators
were
Administration
Agency (Decision appropriately
239/IX/6/8/2003); reported.
EKPPD Ministry of Home yes yes yes yes yes
(Module 1 of Affairs (MoHA)
EPPD)
Law 32 of 2004 on
Policy makers Regional/ Local
(Head of ) Governance;
Provincial GR 3 of 2007 on
Governments; sub-national
District/ Municipal Government report
Governments; to Central
Provincial/ Local Government and
Parliaments information to
(DPRD); and provincial/ local
Implementing parliament);
Agencies at GR 38 of 2007 on
Provincial and Functional
District Levels Assignments;
(SKPD). GR 41 of 2007 on
Organization of
Local Government;
GR 6 of 2008 on
Evaluation of Local
Governance
Implementation;
Regulation of
MoHA 73 of 2009;
12

13. Instrument Leading Agency Indicators Remarks
and Arena of and Particular
Asssessment Legal Base
Outcome
Process
Benefit/
Output
Impact
Input
EPRPD Ministry of Home yes yes yes yes ?
(Evaluation of Affairs (MoHA,
Sub-National Governor, Regent/
Development Mayor);
Plans
Implementation): Law 32 of 2004
Provincial & Local (Article 154);
Governments and GR 8 of 2008 on
Steps, Procedures
Implementing
Agencies of Formulation,
(SKPD)8. Supervision and
Evaluation of Sub-
National
Development Plans;
• Evaluation of Ministry of National
National Development
Development Planning
Plans (BAPPENAS)
Implement-
ation: Law 25 of 2004 on
National
Development
Planning System;
GR 39 of 2006;
• Progress
Monitoring of [*Ref. Article 4 of Yes* Yes* Yes* No No
Implementation Para 4 under
of Development Chapter two of GR
Plans; 39 of 2006;
• Evaluation of
Implementation Yes* Yes* Yes* Yes** No
of Annual Plan **Ref. Article 3 of
of Ministries/ Para 13 under
Non-Ministrial Chapter two of GR
State 39 of 2006 reg
Institutions evaluation of the
Annual Plan of
Ministry/ Institution &
Annual Plan of
Government];
• Evaluation of Yes Yes Yes Yes*** Yes***
Strategic Plan [*** Article 5 of Para
8
This evaluation is primarily based on quarterly report of respective agencies to the Head of
BAPPEDA (Development Planning Board).
13

14. Instrument Leading Agency Indicators Remarks
and Arena of and Particular
Asssessment Legal Base
Outcome
Process
Benefit/
Output
Impact
Input
of Ministries/ 15 under Chapter
Non-Ministrial three as well as in
State the Elucidation of
Institutions & GR 39/ 2006 reg.
National Mid- Evaluation of
Term Strategic Plan of
Development Ministries/ Non-
Plan Ministrial State
Institutions &
National Mid-Term
Development Plan
Table 1 shows that these existing performance measurement instruments
have some shared objectives and measure the same dimensions of
performance (economy, effeciency and effectiveness) and the same level of
indicator along results chain (input-process-output-oucome-benefit/ impact).
In addition, we uncovered that these instruments put too strong focus on
quantitative measures of performance (particularly input and outputs) and
pay less attention to the qualitative dimension of performance. In addition,
all instruments overlook the different context that influence [local]
government’s performance; this may lead to punishing inappropriately poor
regions working under difficult conditions or rewarding inappropriately better-
off regions working under favorable context. We further discuss these issues
and other problems under Section 4.
Table 2: Arena and number of performance indicators at provincial,
municipal and district levels
Province Municipal District
Policy Implement- Policy Implement- Policy Implement-
level ation level Level ation level Making ation level
Level
General 28 28 28
Administration
Obligatory 107 120 120
Functions
Discretional 16 26 26
Functions
Total 63 151 74 174 72 174
14

15. The number of performance indicators involved for the assessment of local
governance performance require robust and plausible baseline data and
milestones to measure the progress. In addition it will require tremendous
efforts and strong commitment to collect evidence and report the progress of
achievements. Sub-national governments, however, have not only to do self-
assessment and deliver report according to the EKPPD framework but also
for other performance evaluation schemes as presented in Table 1. Overall,
sub-national government has to deliver more than 50 different kinds of
petformance and accountability report annually.
Table 3 highlights selected dimensions and example of performance
indicators for policy makers and implementing agencies at provincial level
only according to EKPPD framework.
Tabel 3: Some dimensions and key performance indicators (KPIs) for local
governance performance (EKPD) at Provincial level
Arena Performance Dimension Examples Key Performance Indicators
Policy Makers Public Order (10 KPIs) • Availability of Provincial Regulation on Spatial
(63 KPIs) Plan (Yes/ No);
• Proportion (%) of District/ Municipal in the
province having Regulations on building
permit;
• Frequency of demonstration against
Provincial/ District/ Municipal Regulations;
Coherency between • Proportion (%) of regional development
regional and national priorities in coherence with national
policies (13 KPIs) development priorities;
• Obligatory functions (%) implemented by
Provincial/ District/ Municipal Government
according to GR 38 of 2008 (26 obligatory
functions in total);
• Ratio of expenditure for health and education
to total expenditure (%);
• Proportion of district/ municipalities of the
province establishing regulations on public
service (%);
• Coherency between provincial/ local
governance structure with GR 41 of 2008;
Intensity and • Number of public consultation conduceted;
effectiveness of public • Existence of information media thatis
consultation (2 KPIs) reinforced by Governor’s regulation and
accessible by public;
Innovation in local • Ratio of budget allocated for innovative
governance (10 KPIs) governance to total expenditure (%);
• Economic growth (GRDP growth);
• Establishment of E-procurement (Yes/ No);
Implementing Technical Policies of • National programs implemented by
15

16. Agency: governance (2 KPIs) implementing agencies at regional/ local level
General (%);
Adminstration • Existence of Standard Operating Procedures
Aspect (Yes/ No);
Institutional Structure (3 • Aggreement of organizational structure, tasks
KPIs) and functions assignment with GR 41 of 2007;
• Number of functional positions without
occupant;
Regional/ Local • Existence of planning documents (numbers);
Development Planning • Number of programms in regional development
(4 KPIs) plan documents accomodated in the
implementing agency’s development plan
documents;
Local Financial • Ratio of implementing agency’s budget to total
Management (5 KPIs) expenditure of region;
• Ratio of capital expenditure to total expenditure
of the implementing agency;
Implementing Health Sector (11 KPI) • Live expectancy;
Agency: • Number of villages (%) included in the
example of Universal Child Immunization Service;
Obligatory • Number (%) of undernourished children under
functions five years old getting appropriate medical
treatments;
• Number of identifiable dengue fever cases
treated appropriately;
Overall, the EKPPD for policy making and imlementation levels captured mainly
the process and output-oriented indicators. However, for the case of obligatory
functions (at implementation level) a few number of outcome-oriented and
impact indicators were included, such as life expectancy, regional economic
growth, increased productivity of food crops, sectoral contribution to GDRP,
and reduced unemployment rate.
4. Prospects and Problems in the Implementation of Performance
Measurement
4.1 Prospects
The Indonesian government has apparently made tremendous efforts and
innovation to establishing performance measurement system as a
management tool to improve results and its public accountability.
Conceptionally the Indonesian performance measurement system adopts an
extended “IOO” (input-output-outcome) model in which the outcome is further
elaborated into benefit and impact. Adoption of this model could stimulate
change toward estabalishing more efficient and responsive goverment and
strengthening focus on results along the principles of good governance. We
observed that implementation of performance measurement, reporting and
evaluation has considerably induced multiple stakeholders’ debates and
dialogues which, in turn, could help improve the quality of governance and,
thus, the quality of democratic and economic outcomes at all levels.
16

17. However, implementation of performance measurement in decentralized
context in Indonesia apparently faced a number of fundamental chalenges.
We discuss some of these challenges in the following section.
4.2 Issues and Problems
4.2.1 General Issues and Problems
We recognized that numerous existing sectoral laws and regulations could
provide plausible legitimicacy for the central and sub-national level
governments to plan, allocate resources and implement performance
measurement. These laws and regulations also provided doorway for civil
society organizations to participate in performance measurement and
evaluation. However, these sectoral regulatory frameworks brought about not
only legitimacy and greater potential toward creating better governance
outcomes but also notable conflicting orientation, overlapping authorities and
missmatching criteria and indicators of performance (e.g. GR 3 of 2007 and
GR 6 of 2008). Furthermore, inter-ministrial platform to coordinate and
sincronize regulatory frameworks and instruments of performance
measurement has not been effective due to lack of functional clarity and
collective commitment among others.
Meanwhile, majority of eligible civil society organizations lack the incentive,
secure financial resource and technical capacity to establish and mobilize
multi-stakeholders’ processes to make performance measurement works for
enhancing evidence-based policy making and strengthens outcome-
orientation among public agencies at all levels. However, indepth analysis on
regulatory framework and its consequences to effectiveness of perfromance
measurement is beyond the scope of this paper.
Some previous practioners’ and our own observations added evidence to
support the multiple principals and multiple tasks (goals) trade-off hypothesis
(Propper and Wilson, 2003). According to this hypothesis, a public sector
agency inevitably serves multiple stakeholders ranging from self-interested
individuals, the service users, tax payers, politicians, private sector
organizations and civil society organizations at different levels among others.
This feature, in one way or another, determines public sector organizations
to pursue multiple ends (multiple goals) which are not necessarily coherence
each other. These multiple and incoherence goals created difficulty in
selecting appropriate performance indicators and in avoiding the “3Es trade-
off” (Economy, Effeciency and Effectiveness). For instance, to pursue the
goal of improved quality and scope of health service for the poor people, local
governments do have difficulty to match both effeciency and effectiveness
criteria. This is, of course, not to say that a public agency has unchallenged
legitimacy to deliver service for public at any cost. Elected policy makers face
increasing challenge to provide services in more accountable, efficient and
cost effective ways.
17

18. Furthermore, contextual diversity and inter-regional disparity in Indonesia
reasonably mobilized local governments and other stakeholders including
politicians to challenge the application of uniform criteria and indicators of
local governance performance. This debate calls for improvement of
methodology including selection of appropriate criteria and key performance
indicators along with appropriate weighting of performance scores.
These call for more systematic and coherence performance measurement
system, improvement of indicators selection process along with capacity
building efforts, particularly at regional and local levels.
4.2 Issues and Problems at Regional/ Local Level
The problems inherent in the regulatory framework of performance
measurement as discussed in Section 4.1 have far reaching consequences
to sub-national level governments and other stakeholders. The response of
sub-national government and legislative councils toward the central
government-led performance measurement varied considerably. A few
number of sub-national governments, e.g. Solok district of West Sumatera
province, Sragen district of Central Java, Tarakan City in Kalimantan,
Jembrana district in Bali as well as a number of regions in East Java and
Eastern Indonesia (e.g. Mataram City and Bima City) were widely recognized
for their “best practices” innovation in local governance and performance
management among others. However, in turned out that outcome-oriented
services and performance measurement had not been fully adopted as
governance perspective and instrument by the majority of sub-national
governments. We observed that support structure to coordinate and
implement outcome-focus performance measurement was either not in place
or ineffective. Moreover, many performance reports maintained the “tradition”
of reporting financial inputs and public expenditures to produce physical
outputs and services. Furthermore, sub-national governments in most regions
lacked reliable and consistent baseline data and benchmarks for the
formulation of realistic performance targets as well as for milestones of
performance measurement. Although the central and sub-national
governments have made substantial efforts to improve availability and quality
of data, following problems remain pervasive in sectoral and regional planning
documents:
• Lack of horizontal and vertical coherence among planning documents
(including their objectives framework and performance indicators);
• Vague link between outputs and outcomes;
• Outputs and outcome indicators were not clearly defined;
• End performance targets were defined but no sufficient baseline data
were given as milestones for performance measurement.
Furthermore, it was well recognized that capacity of human resources to
adopt the Input-Output-Outcome (IOO) model in planning and performance
18

19. measurement varied considerably among regions. This limiting factor calls for
a more comprehensive capacity building approach including individual,
organizational and system levels.
5. Lessons Learned and Ways Forward
The Indonesian government has made tremendous efforts to establishing
performance measurement system as a management tool to improve results
and its public accountability. Conceptionally the Indonesian performance
measurement system adopts an extended “IOO” (input-output-outcome)
model in which the outcome is further elaborated into benefit and impact. The
model shows the interest of Indonesian government to strengthen focus on
results and, thus, strengthen its client orientation (benefits/ impacts for
citizens, individuals and business).
However, implementation of the adopted model in Indonesia has not brought
sufficient incentive for public agencies at all levels of administration to perform
better. Major problems and obstacles to implement performance
measurement system in Indonesia are discussed in the previous section. In
short, we uncovered that inherent institutional complexity along with the
overwhelming data needed for self-assessment and reporting limit its
actionability and effectiveness. The established system is just not doable!
Furthermore, we observed that the currently applied performance
measurement instruments maintain the “tradition” to focus on quantitative
measures and overlook the value of qualitative dimension of performance.
These quantitative measures tell us very little about why a public agency
performs or does not perform well.
In the absence of coherent objectives frameworks, effective support
structures, clearly defined performance indicators and competent human
resources, the central and sub-national governments do have difficulties in
implementing the concept of outcome-oriented performance measurement as
well as the concept of performance-based budgeting. These problems,
however, were not fully indpendent from conflicting political orientation along
with the multiple principals trade-off as discussed in Section 4.1.
One among several critical challenges is, thus, to establish a performance
measurement system that meets the citeria of good governance, coherent
legal and institutional framework that clarify interlinkages between
planning, performance measurement and performance-based budgeting.
Understanding of this issue would facilitate the development of a nested
model and workable concepts as well as self-dynamic (more client
orientation-driven than regulation-driven) performance measurement system.
It is necessary to enhance evidence-based and accountable decision-making
and to strengthen the focus of any intervention on results (outcomes). Toward
these objectives the following perspectives and measures are forwarded:
19

20. The State Ministry of National Development Planning should take a
leading role in exploring best practices, facilitating multiple
stakeholders’ dialogues toward establing coherent conceptual, legal
and institutional frameworks for performance measurement. This is in
line with the perspective in the Indonesian Mid-Term Development Plan
of 2010-2014.
• In our view, impact monitoring and evaluation play a critical role in
complementing the recurring performance measurement. It attempts
to capture longer-term and aggregated outcomes, namely ends
outcomes in terms of benefits/impacts for the public. These ends
outcomes, of course, are the results (effects of interactions) of
multiple-actors’ efforts. In economic terms, these ends outcomes are
indeed the sum of marginal outcomes among multiple actors in
governance and development. In contrast to impact monitoring and
evaluation, performance measurement should maintain focus on the
quality of process and the quantitative and qualitative dimensions of
immediate outcomes.
• Furthermore, the impact monitoring and evaluation attempts to capture
not only the formalistic performance indicators (set up by service
providers) but also external stakeholder’s perspective (external
indicators). The notion of external indicator measures the satisfaction
of the public on responsiveness, effectiveness and accountability of the
public service agencies.
• Along with the above efforts, Civil Society Organizations should use the
opportunities emanating from the decentralization policy and regional
autonomy to play an active role to make performance measurement
work for improving public services as well as for improving democratic
and economic outcomes. This would need a comprehensive capacity
building covering individual, organization and system levels.
20

21. Acknowledgements
The author gratefully acknowledges Dr. Manfred Poppe, Senior Component
Team Leader of Decentralisation as Contribution to Good Governance, for
his valuable comments for the revision of this paper. I thank my
colleagues from the Decentralisation as Contribution to Good Governance
(DeCGG) Project, particularly M.P. Dwi Widiastuti, Mr. Mario Vieira, Mr. Arifin
Bhakti for sharing their observations and empirical experience from sub-
national level. I also thank Meithya Rose Prasetya and Jevelina Punuh for
their assistance in literature review and data collection.
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