State Sector Productivity

Improving State Sector Productivity
01 Aug 2018
Measuring State Sector Productivity
01 Aug 2018
Issues paper - measuring and improving state secto…
01 Jul 2017
Productivity measurement case study: Courts
01 Dec 2017
Productivity measurement case study: early child…
01 May 2017
Productivity measurement case study: Ministry of S…
01 Jul 2017
Productivity measurement case study:Police
01 Sep 2017


The terms of reference ask the Commission to undertake an inquiry into measuring and improving productivity in public services, and to provide guidance and recommendations on:

  • how to measure productivity in “core” public services (health, education, justice and social support) at sector and service level;
  • what role productivity measures should play in public sector performance frameworks; and
  • how to develop the culture, capability and systems needed within government agencies to measure, understand and improve productivity.

Because of the broad scope of the terms of reference covering the health, education, justice and social support sectors – and in the interests of providing more accessible material and better tailoring the advice to different audiences – the Commission has produced two main documents:

  • advice and recommendations to ministers and state sector leaders aimed at improving state sector productivity (this document); and
  • guidance for officials on measuring state sector productivity.

Together, these documents fulfil the requirements of the terms of reference.


The Commission has conducted case studies – from creating simple labour productivity ratios using routinely collected police call centre data, to constructing quality-adjusted productivity indices for tertiary education – to illustrate the range of measurement issues analysts may encounter. The Commission explored cultural attitudes to efficiency and performance improvement in the state sector – canvassing the views of 20 current and former state sector leaders. Victoria University of Wellington's survey of Public Service Association (PSA) members provided insights into state sector organisations' ability to handle change, learn from mistakes and find new ways of working.

Key Results

Improving State Sector Productivity

Chapter 1 – Why state sector productivity matter

Raising the productivity of the state sector is one of the most important contributions a government can make to national productivity and wellbeing. Higher state sector productivity would generate benefits for individuals and communities (in the form of better outcomes and more services), and the government (in the form of less pressure on public finances).

Innovation is key to improving state sector productivity. There are organisational characteristics that make an agency more (or less) likely to innovate or adopt new ways of working. Political and external environments also make a difference to whether state sector agencies are encouraged to innovate to improve productivity.

Chapter 2 – The New Zealand state sector – features & experience

There appears to be little demand for, and little inclination to supply, productivity-related performance information on core public services.

There is some active resistance to the concept of productivity and efficiency, based either on concerns about the effort required to collect information for productivity measurement, or concern that a focus on inputs and outputs will undermine the achievement of positive outcomes for New Zealanders.

The New Zealand state sector is intolerant of failure, which has the effect of stifling innovation.

Many agencies lack the systems or cultures necessary for ensuring the quality of policy advice.

Agencies’ approach to commissioning can leave limited room for customer input into design and delivery; and can be poorly targeted, leading to ineffective delivery and failure demand. Traditional commissioning approaches limit the scope for innovation and improved productivity in service delivery.

Overly prescriptive funding models are constraining innovation in public services. Prescribing how inputs are to be deployed, or setting decision rights at the wrong level, can also increase the costs of services without leading to
greater effectiveness.

Despite built-in processes to encourage efficiency and review, and some recent improvements to evidentiary and evaluation expectations, the incentives in the budget system for agencies to seek productivity gains in core public services are weak.

Agencies’ greater use and connection of data, analytic and investment models in policy development and resource allocation is a positive step forward. While the use of evidence in policy design and performance assessment is growing, it is far from universal.

The attention paid by agencies to monitoring, review and evaluation of core public services is generally inadequate. This limits the ability of ministers and agencies to understand what works, where improvements need to be made,
and how resources should be best allocated.

Chapter 3 – System-level changes for a more productive state sector

Ministers have a role to play in supporting agency efforts to improve productivity by championing innovation in public service delivery.

The ability to quantify and measure is important for improving state sector performance, but agencies often lack the capacity, capability and inclination to measure productivity.

There is a place for well-designed quantitative productivity measures in public sector performance systems. The main benefits of including such measures is to ensure that a balanced picture of performance is obtained, and to send stronger signals about the relative importance of productivity.

Page last modified: 22 Mar 2024