1. Productivity in public services is difficult to measure compared to private sector services due to the lack of market forces and profit motives. Measuring quality and effectiveness is even more challenging but important. 2. The Finnish Tax Administration improved productivity over 25 years through digitalization, which streamlined processes, reduced personnel needs despite increasing tasks, and saved citizens 8+ million hours annually filling out pre-filled online tax forms. 3. Management and leadership are crucial for public sector productivity according to the Finnish experience, as they guide strategy, understanding of the organization's purpose, and productivity improvements through changes to processes, organization, skills, and laws.

1. Public Service Productivity
Some Food for Thought
OECD Global Forum on Productivity
7-8 July 2016, Lisbon, Portugal
Markku Stenborg

2. 1. Some General Remarks
2. Case Finnish Tax Administration

3. 1. Productivity in Public Services
‒ “Productivity isn’t everything, but in the long run it is
almost everything. A country’s ability to improve its
standard of living over time depends almost entirely on its
ability to raise its output per worker.” P. Milgrom
‒ Not so straightforward in public (marketless) services!
‒ Do we always need more public output?
‒ Other dimensions more important?
‒ Measuring productivity has well known challenges, eg.
Dunleavy and Carrera (2013)
‒ Measuring quality and effectiveness is even harder and
more imperfect, but ignoring might be disastrous
3

4. 25+ Years of Effort in Finnish Government
‒ Severe economic crisis in 1990’s; unsustainable public
economy, esp. local government
‒ Statistics Finland: local government productivity has
systematically fallen
‒ What do official statistics measure? Often inputs i.e.
nothing
‒ For instance, number of patients per doctor: high
productivity vs. low quality ineffective service
‒ Peer pressure & best practices? Not so simple. Different
incentives in central and local gov’t, decentral information
and differing local conditions
4

5. Three Lessons from Finnish Experience
‒ ”If the only tool is hammer, all problems look like nails.”
1. Instead of one productivity measure, aim for broader
measures of outcomes
2. Identify factors that affect productivity, quality and
effectiveness
‒ Competition, innovation, market experimentation and
creative destruction major factors behind productivity
growth in private sector
‒ Public sector safe from such pressures, usually
3. Management and leadership matter (Bloom et al.), and
more likely so for public service productivity
‒ Incentives matter; focus on strategy of organization helps
5

6. Some References
Bloom, N.; Genakos, C.; Sadun, R. and Van Reenen, J. (2012), “Management Practices
Across Firms and Countries”, The Academy of Management Perspectives, 26(1), 12–33.
Dunleavy, P. and Carrera, L. (2013), Growing the Productivity of Government Services.
Edward Elgar.
Jääskeläinen, A. (2010), Productivity Measurement and Management in Large Public
Service Organizations, Doctoral Thesis, Tampere University of Technology, Publication
927.
Jääskeläinen, A. and Lönnqvist, A. (2011), “Public Service Productivity: How to Capture
Outputs?”, International Journal of Public Sector Management, Vol. 24:4, pp. 289-302.
Kork, A.; Mänttäri P. and Vakkuri, J. (2015), “Complexities of Productivity Policies in the
Finnish Public Sector: Knowing How to Do More with Less?”, Financial Accountability &
Management, 31(4), 0267-4424.
Le Grand, J. (2007), The Other Invisible Hand: Delivering Public Services through Choice
and Competition, Princeton University Press.
Linna, P.; Pekkola, S; Ukko, J; and Melkas, H. (2010), “Defining and Measuring
Productivity in the Public Sector: Managerial Perceptions”, International Journal of Public
Sector Management, Vol. 23: 5, pp. 479–499.
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7. 2. Digitalization. An Example
‒ 1991: Tax returns on paper at independent local offices
‒ Internet as major opportunity for Tax Administration
‒ Not only digital tax forms, but new ways of doing taxes
‒ Renewed strategy: Admin. is for people, not other way around
‒ Required major overhaul of procesesses, organization, know-how
and job qualifications…
‒ …and of laws and structures
‒ Now almost everything online, much automatically
‒ Prefilled tax return form: Admin. collects data, taxpayer checks
7

8. Some Results
‒ Common national work streams
‒ Tax Admin best public employer, 16th overall
‒ Personnel down by 30+% even with more and more complex
tasks
‒ 90% of VAT file online
‒ 76% of companies file income tax online
‒ 3/4 of individuals do not change anything on pre-filled form
‒ Less administrative burden: individuals save 8+ million hours
annually
‒ Key lesson: clear strategy & understanding why this public service
exists guides productivity improvement
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9. Productivity and Costs
9
100.0
103.2
107.7
112.5
117.8
125.0
130.1
134.0
137.9
144.6 146.8
100.0 99.5 97.8 96.9
90.3 88.0 86.1 84.0 83.1 81.1 80.0
60.0
70.0
80.0
90.0
100.0
110.0
120.0
130.0
140.0
150.0
160.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Tuottavuus indeksi Taloudellisuus indeksi
Productivity Index (weighted number of customers / hours worked)
Cost Index (per weighted number of customers)

10. Thank You!