Central government guidance and direction

This refers to a set of procedures, systems and methods, and the documents associated with them, that support leadership and management. Leadership and management work hand in hand with guidance and direction. Leadership and management means methods and procedures that leadership and management use to achieve the objectives that have been set. By developing the system, a good balance can be achieved in central government finances and the activities as a whole.

The Ministry of Finance is responsible for the governance systems of central government finances and for developing these systems. The Ministry of Finance and its branch of government are responsible for a large part of corporate governance at the national level. In its branch of government, the Ministry also guides and directs major corporate service providers that provide services for the whole of central government.

Key elements in the guidance and direction of administrative and public service provision include setting objectives that are significant for the society and guidance and direction that helps achieve these objectives as well as organising operations in a prudent and efficient way.

Government Programme and its implementation plan anchor-ing strategic guidance and direction

Central government has numerous objectives related to public policy, in the operation of the administrative organisation and in public service provision. Strategic guidance and direction refers to the strategic priorities that the Government and the ministries have set for central government operations. Political steering is a political choice of objectives made by the Government and Parliament. At the level of ministries, the Prime Minister’s Office is responsible for overall strategic guidance and direction.

The main instrument that the Government uses in its strategic guidance and direction is the Government Programme. The Government Programme is an action plan approved by the parties included in the Government, in which an agreement is reached on the most important domains of the Government. An implementation plan of the Government Programme is drawn up in order to realise its objectives.

The implementation plan specifies the main objectives of the Government Programme priorities, key projects and responsibilities for preparing cross-administrative sets of policies.

The objectives for developing the systems of governance for central government finances and operations are to ensure that these systems are cost-effective and efficient, to streamline and enhance the processes in guidance and direction, and to boost the corporate point of view. This is done by advocating a corporate approach to management and joint organisation of operations where financial benefits and quality improvements can be gained through centralisation.

Performance management is part of central government corporate governance

Performance management is an agreement-based guidance tool that serves to strike a balance be-tween the resources available and the outcomes that the resources can generate while enhancing service quality and ensuring cost-effective service provision. A key feature of performance management is that it is based on policy objectives set out in the Government Programme, in the corporate targets of the branches of government and in the targets of individual government agencies and public bodies. It plays a significant role in the overall guidance and direction of resources and budgetary finances.

In the context of central government, performance management could be understood in a broader sense to denote a general system, an endeavour and guidance and direction towards greater productivity. In a narrower sense it could be seen as guidance and direction of the government agencies and public bodies within the branch of government of the ministries, whereby performance targets and are set and resources for meeting the targets are allocated.

Key policy instruments of performance management: the Budget and performance agreements between ministries and government agencies and public bodies

The Budget includes appropriations for the budget year allocated to the government agencies and public bodies. The available resources and the outcomes to be achieved with the resources are established in detail in multiannual performance agreements between the ministries and government agencies and public bodies within the branch of government of the ministries.

Based on the resources in the Budget and the initial performance targets, the ministries negotiate with the government agencies and public bodies to establish performance targets for the budget year and the resources required to attain the targets. The outcome of the negotiations, the performance targets for the budgetary year and the resources required to reach the targets are recorded in a performance agreement, which is signed by both parties.

The government agencies and public bodies give an annual account of the realisation of the per-formance targets that were set, which is then included in the financial statements of the govern-ment agencies and public bodies. Following this, the ministries take a position in the final ac-counts on the performance of the government agencies and public bodies and on any measures to be taken. The ministries also report to Parliament on the performance of their entire branch of government in connection with the Government Annual Report.

The spending limits procedure is a key part of performance budgeting and financial planning that spans several years. In this procedure, the Government decides on the budgetary spending rules and spending ceiling when it takes office; in other words, it establishes spending limits for the whole four-year government term. Within the scope of the spending limits for the government term, the allocation of appropriations for the branches of government are reviewed annually in the decision on spending limits in March every year. This decision is based on the spending limit pro-posals of the branches of government.

Other key policies and documents on the operation of the government agencies and public bodies, such as statutes and the strategies for the branches of government, have a bearing on the content of the performance agreements. This is illustrated in the figure below for the branch of government the Ministry of Finance.

Figure. Key policies that impact the performance agreements; branch of government of the Ministry of Finance

Content and timeline of the performance management process

The multiannual performance agreements must contain the most topical and essential themes in terms of the guidance and direction between the relevant government agency or public body and the ministry. In addition, key targets for each government agency's or public body’s operational performance are set out in the performance agreements (targets for effective operations, productivity, and quality as well as for the performances and public commodities to be achieved). The volume and quality of the available resources and an estimate of how the following years will develop also play an important part in the performance negotiations.

The negotiations are based on a dialogue between the relevant ministry and government agency or public body. While a draft agreement can be prepared by either party, discussing it together and arriving at an agreement is instrumental.

The ministries and their respective government agencies and public bodies negotiate the multiannual performance agreements for the entire government term in the autumn once the Government has formulated its new Government Programme. The targets are then examined and revised where necessary and in collaboration in the second, third and fourth year of the government term. At the same time, the timeline examined in the performance agreement is scaled up so that the performance agreement looks progressively ahead across every four years, both in terms of resources and targets. In the final, fourth year of each government term, the performance negotiations ought to stress not only the assessment of the past year and the striking of an agreement for the following year, but also the importance of reporting on how well the overall targets set for the whole government term were achieved.

The performance targets for the following year are settled by the end of the year of preparation and the performance agreement is signed as soon as possible after Parliament has adopted the Budget for the coming year. The achievement of the performance targets, i.e. the outcomes, are reported in an interim report based on the achievements over a six-month period. The outcomes for the whole year are reported early the following year in the annual report included in the final accounts. Any intermediate performance target discussions are held whenever necessary and the achievement of performance targets is monitored over the course of the year and, if necessary, changes to the targets and activities are also agreed over the course of the year.

The process in a ministry:

The ministry's leadership produces guidelines for the relevant round of performance negotiations
The ministry's department coordinating performance management issues instructions on practices and schedules to be followed
Compilation of the material on performance negotiations in the ministry
The ministry’s leadership endorses the ministry's policies on performance negotiations
The ministry’s leadership, the coordinating department and the departments participating in the performance negotiations conduct the negotiations
The ministry’s leadership adopts and signs the performance agreement
The targets in the performance agreement are incorporated into the targets of the ministry and its departments and units; the targets are linked to personal targets in performance appraisal discussions
The ministry monitors the resources in the government agencies and public bodies under its mandate as well as the achievement of the performance targets on the basis of the reporting these organisations provide; the parties meet regularly to discuss changes in the operating environment and the required actions and to monitor target attainment and any intermediate performance target discussions are held whenever necessary.

The process in a government agency or public body:

The government agency's or public body’s management produces guidelines for the relevant round of performance negotiations
The government agency's or public body’s department coordinating performance management issues instructions for practices and schedules to be followed
Compilation of the material on performance negotiations in the government agency or public body
The government agency’s or public body’s management endorses the government agency's or public body’s policies on performance negotiations
The government agency’s or public body’s management, the coordinating department and the departments participating in the performance negotiations conduct the negotiations
The government agency’s or public body’s management approves and signs the performance agreement
The targets of the performance agreement are incorporate into the targets of the government agency or public body and its units; the targets are linked to personal targets in performance appraisal discussions
As a rule, the government agencies and public bodies prepare a report twice a year (a.k.a the interim report plus the annual report, which is part of the final accounts) on the achievement of the targets in the performance agreement and monitor how the performance targets evolve; the parties meet regularly to discuss changes in the operating environment and the required actions and to monitor target attainment and any intermediate performance target discussions are held whenever necessary.

The figure below illustrates the key phases and outcomes in performance management in the form of an annual planning cycle. The example is of the branch of government of the Ministry of Finance.

Figure. Example of an annual planning cycle for performance management and financial planning; branch of government of the Ministry of Finance.

Performance management consists of regular discussions on the attainment of key strategic targets

Performance management is a management system ensuring that the set targets can be achieved with the planned resources. Successful performance management requires that the management takes ownership and shows commitment and that clear processes and schedules are in place. In practice, this means that senior management directs and monitors the process and that the personnel can participate in it across a broad front.

In central government, performance management is about dialogue and regular interaction between the government agencies and public bodies and the ministry. Rather than a ‘spot check’ approach based on a few meetings a year, the performance management process consists of regular discussions on the attainment of key strategic targets, reviews of the overall situation, and put-ting required changes into practice. This creates trust between the parties and builds a shared commitment to succeed.

The State Treasury’s services include analysis and reporting services and a government performance information system

The government performance information system contains data on performance targets and their attainment, and serves as a preparation and planning tool. The system can be accessed by all government agencies and public bodies, and its use does not require any separate investment in hard-ware or software. The information to be exported to the system is specified in the following regulation (in Finnish) issued by the State Treasury. The data processed in the system are kept as with-in in the ministry, government agency or public body up until they are made released to the public. Users log in to the government performance information system via the State Treasury’s e-services.

Under the exploreadministration.fi website, the section on productivity brings together data on the performance targets of ministries, government agencies and public bodies, and on the attainment of these targets. The performance targets and their attainment can be viewed in ready-made reports. Users can choose a year and view the situation at government level or for a particular minis-try together with the government agencies and public bodies within its branch of government, or users can focus on a single performance-managed government agency or public body. Government planning and monitoring documents can also be viewed in the service, including performance agreements for specific government agencies and public bodies as well as final accounts.

The State Treasury’s analysis and reporting services help government agencies and public bodies in problem solving by offering a consultation service focusing on evidence-based management. In practice, the analysis and reporting services produce comparative data and analyses, and identify areas that could be further improved. The aim is to help government agencies and public bodies solve information-intensive problems and protect the overall interests of central government in developing, guiding and managing operations. The analyses are produced in cooperation with group-level government organisations. The exploreadministration.fi website also provides a more standardised public reporting service on central government financial, personnel and productivity information, and increasingly also on other public information at group level in government as well as information on the local government sector.

Development of performance management

The Ministry of Finance is responsible for the overall development of performance management in central government. In addition, each branch of government develops and is responsible for its own more detailed procedures and processes for performance management.

A comprehensive assessment of the principles and practical implementation of performance management in different branches of government was published on 11 May 2021 as part of the Government's research activities. Performance guidance has also been continuously developed over the course of the 1990s, 2000s and 2010s in a number of cross-administrative projects.

Contact information

Mikko Saarinen
Ministerial Adviser
Tel. +358 295 530047
[email protected]

Markus Siltanen
Senior Ministerial Adviser
Tel. +358 295 530263
[email protected]