Introduction

Managers in private sector industries can measure their performance in a variety of ways, for example by changes in the volume of sales or by financial ratios such as return on capital employed or net profit margin. Such measures are integral to the accounting systems necessary to run the businesses concerned. In nationalised industries, especially those such as the NHS where income is largely fixed, such measures either do not exist or would not be a fair index of management performance. In such situations alternative measures are required for managers and others to evaluate their performance. The Department of Health's latest health service indicators (HSI) represent the current state of play in the attempt to meet this requirement in the NHS.

Even though it may be clear exactly what aspect of performance is to be measured, there may be considerable uncertainty about how to encourage people to use the information. At one extreme is simple publication – a take it or leave it approach. At the other extreme the indicators can be linked to a formal performance review mechanism or used to illuminate decisions in a market place, and in such cases the likelihood of change can be increased by tying them to personal targets and incentives.