Impact of Performance Management in Public and Private Organizations

Recent theoretical developments suggest that management actions have different impacts on outcomes in public and private organizations. This proposition is important to public organizations’ widespread import of private sector management tools, such as performance management. This article examines how performance management influences performance outcomes in otherwise similar public and private organizations. Showing that the factors expected to diminish the impact of performance management parallel the organizational characteristics of public organizations, we hypothesize that this type of management is less effective in public organizations. A difference-in-differences model based on survey data on management in Danish public and private schools, combined with administrative data of students’ test scores, confirms the hypothesis. The results have important implications for the transfer of management actions across sectors.