Operational Review of Business Performance Evaluations of State-Owned Enterprises
March 13, 2017
Park Hongyeop, Nah Yousung
The public institution business performance evaluation system makes an annual assessment of management efforts and performance outcomes in a fair and objective manner, in order to establish an independent and responsible business structure for state-owned enterprises (SOEs). The ultimate purpose of such a system is to make improvements in the public services provided by the SOEs via strengthening their public service mission and management efficiency as well as providing professional consulting services. The government has utilized this business performance evaluation system over the past three decades as part of efforts to make institutional improvements. Through the evaluation system, the government aims to pressure SOEs in monopolistic sectors to undertake managerial innovation towards enhancing productivity and efficiency.
However, various issues continue to be raised regarding the business performance evaluation system such as a lack of autonomy and the application of stronger controls under a uniform standard. Therefore, this report makes an assessment of subjects including the business performance evaluation system, evaluation process, utilization of outcomes and the overall evaluation conditions derived from an empirical analysis of business performance evaluation outcomes at SOEs which provide public goods essential to the livelihood of the public.
As a result, it was found that the current scoring system of the SOE business performance evaluation system depends upon quantity indicators. Since quantity indicators are structured to be determined by revenues and operating profits, it has been pointed out that the potential impacts of factors that are not controllable by the institution alone need to be mitigated in order to increase the feasibility of the business performance evaluation system.
In addition, regarding the evaluation process, since the evaluation relies upon the individual capacity of the members of an evaluation team created every year on a temporary basis, the feasibility of conducting an expert analysis or assessment is limited. Therefore, this report recommends that the evaluation burden be reduced to an appropriate level by securing expertise within the management evaluation team and by utilizing the public institution management information system.
Furthermore, since the current state of feedback consultations following business performance evaluations is limited due to time constraints and the lack of expertise among the evaluators, there is a need to reinforce the consulting function in order to make actual managerial improvements based on the outcomes of evaluations.