Performance budget commonly refers to the input of resources and the output performance for an organization. Performance budget is often used by government and agency that link their service performance and the fund provided by taxpayers. Outcomes of a performance budget can be measured by, for example, improvement of water quality, improvement of road condition, reduction of violence, and crime rate by number or percentage change. These performance indicators help taxpayers to evaluate the efficiency and effectiveness of a certain project that can bring benefits to them. The government often sets a target of improvement and evaluates the outcome of whether they have met the target by the end of a certain time period. It’s more transparent for taxpayers to understand why and how their money has been spent by the local government.
In the meantime, a performance budget is used to motivate employees in organizations and even schools to enhance their performance for a better outcome. Input for such organizations can provide benefit or training to their employees. An organization can measure employee performance based on the changes in production rate after these inputs. For example, the organization can set a 15% increase in production goal after investing in extra employee training.
Also, the teacher’s performance can be measured by the outcome of the student’s test score to see whether the teacher’s teaching method is effective. Teachers could receive a bonus that is straightly linked to their teaching outcome. The performance budget system is result-driven as the core of measurement is based on the outcome. Teaching outcomes sometimes can be hard to measure as the effectiveness cannot solely rely on test scores but other factors as well.