Is Decentralisation Compatible with the Application of Performance Management? The Impacts of Minimum Service Standards on the Motivation of Local Government to Improve Service Delivery in the Indonesian Decentralised System

Abstract. The extent to which decentralisation is compatible with effective performance management that is able to influence the motivation of public sector bodies has been a subject of limited attention in the academic literature. This paper contributes to that limited debate by investigating the extent to which minimum service standards (MSS), a performance management tool directed at local government service delivery, influences the motivation of local governments in highly decentralised systems, such as that in Indonesia. The two research questions are: (a) what influence does MSS have on the motivation of local governments to improve their service delivery performance, and (b) to what extent does decentralisation influence the implementation of performance management. The information used to answer these questions is taken from semi-structured interviews with eighty-three respondents from central government, district and city governments, and the non-governmental sector. The results of this study show that MSS, with its characteristic minimum thresholds, can lead to different patterns of motivation in local governments to improve service delivery. However, MSS only motivates better performance amongst those local governments whose current performance falls just below the required standard. It does not appear to motivate those who are well above or well below the standards. This study also showed the limitations of centrally led performance management systems like MSS to improve performance. They are constrained by the decentralised nature of the system, wherein the autonomy of local governments has to be respected. This implies that decentralisation is, to some extent, not compatible with effective performance management and attempts to improve local service delivery, which requires strong enforcement and effective incentives. However, this does not mean that MSS has no impact at all. Although the impact is limited, MSS, to an extent, helps to improve central-local dialogue in service delivery. This could be a good starting point for the improvement of public services in districts and cities in the future.