Economy, Efficiency and Effectiveness as Performance Indicators in Government Agencies

2934 Words Apr 18th, 2013 12 Pages
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Essay Sample: Page 2
55). Another aspect of managing performance entails driving value via strategic planning and budgeting. Economy is concerned with inputs and its elements are costs and quality. Finally, managing performance entails monitoring performance and progress. This calls for evaluation or measurement of management (Aulich, Halligan & Nutley, 2001, p. 125). In public sector, economy, effectiveness and efficiency are used to measure performance. Thus, this essay critically analyses the effectiveness of these concepts in measurement of performance.


Economy enables an agency to balance its need to acquire goods and services for carrying out its functions at a lower cost with appropriate level of quality. Accountability for economy enables the agency to know how much it has to spend and on what the money should be spent on (Funnell & Cooper, 1998, p. 33).

As mentioned above accountability for economy enables the agency to know how much it has to spend and on what the money should be spent. However, many governments in pursuit of economy are concerned with reducing expenditure in spite of the social costs brought about with such moves (Cutler, Cutler & Waine, 1997, p. 108). Even though economy has of late become synonymous to cost cutting, many public agencies do not always favour the lowest price tender, service or item offered for sale (Pollitt & Talbot, 2004,
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