Performance measurement in Indonesia: The case of local government

Abstract

Purpose: The purpose of this paper is to investigate the implementation of performance measurement systems (PMSs) in Indonesian local government (ILG) using Smart PLS. Couched within an institutional theory framework, it explores a conceptual model developed to explain the hypothesised relationships between technical and organisational factors and the development and use of performance indicators and accountability practices. Design/methodology/approach: Surveys were sent to senior finance officers in all local governments (457) across Indonesia with a response rate of 21.4 percent being achieved. Smart PLS was used to assess the quality of the data and analyse the research model proposed. Findings: Findings revealed that ILGs developed performance indicators more to fulfil regulatory requirements than to make their organisation more effective and efficient. As a way of increasing the success of PMS implementation management commitment through good leadership was found to be a major contributor. Coercive pressure from central government impacted on the result as did normative isomorphism by way of widespread training by universities (and others) and the subsequent sharing of this knowledge.Practical implications: The findings will assist Indonesian central government formulate future government policy as well as design appropriate strategies for implementing the second wave of (bureaucratic) reform. Originality/value: Set in a local government environment in a developing country, this research is original and makes three major contributions. First, it provides an understanding of factors influencing the development and use of performance measures in the ILG context. Second, the use of Smart PLS is original in this context and fills a gap in the literature examining local government PMS. Last, the existence of institutional isomorphism reaffirms that this theory is still applicable in the twenty-first century and relevant as an explanator of the results in the context examined here.