There are over two hundred public enterprises in Pakistan oriented towards commercial activity. Their very sizeable presence led to a special public interest in the quality of their management and in the results of their operations due to which Government had decided in 1977 that a special unit should be set up by the Auditor General to evaluate their efficiency and assess their performance.
The task assigned to the Auditor General's Performance Evaluation Cell required effort in a new direction for which adequate expertise was not immediately available. The work was started, in the circumstances, by enlisting a few suitable officers from amongst those engaged on other audit work and putting them through a short, intensive three-month training course to reorient them to the demands of their new assignment. This was all the more necessary because they had no direct background of executive responsibility in industry or commerce. Experts for training purposes and for subsequent on-the-job guidance were brought in by courtesy of a friendly foreign government under a technical assistance programme.
The field organisation of the Auditor General's Performance Evaluation Cell at full strength comprised six evaluation teams, each formed of two officers. The senior of them was the team leader. Team leaders were drawn, in general, from amongst such of the younger departmental officers who apparently had the capacity to adapt to quick innovations in work assignments.
The cell needed an appropriate methodology suited to local circumstances. Literature generated in developed countries on efficiency, economy and effectiveness audit was seen in detail, and their experiences in comprehensive audits were also reviewed. It became apparent, however, that fresh, independent thinking was needed to put together the elements of a new evaluation methodology for public sector industrial units in Pakistan. A methodology was evolved subsequently through practical experience. Theoretically, performance evaluation was thought of as a periodic, systematic examination of an organization to identify its strengths and weaknesses so as to reach an informed opinion on the soundness of its operations and thence to recommend meaningful and practical correctives to counter-act inefficiencies, especially in key areas of its activities.
Evaluators were expected to operate within the defined concept. They were required to identify important issues in the life of an enterprise, analyse its past and present behaviour and achievements, and see what probable future trends seemed to be emerging. A dynamic and comprehensive view of the company's environment, resources, activities and goals was required if the insight necessary for the formulation of appropriate recommendations was to be gained. Performance evaluation, seen in this perspective, was very different from routine auditing, which was closely focussed on financial aspects.
Special attention was paid to the time constraint arising from limitations of manpower in terms of workload. An average of about eight weeks was considered an optimum duration for an evaluation team to work at an operating unit. In-depth study of special problems by experts was excluded from the scope of evaluations, though it was open to evaluators to so suggest where, in their opinion, such studies were warranted.
Evaluations commence with a familiarisation round of the physical setting within the company's premises, followed by an introductory meeting with the chief executive for a discussion of the various facets of the company's business operations and constraints. These steps may also be taken in the reverse order, which also had merit. Detailed work commences thereafter. Financial information for the past three or four years is collected first. The information is compiled into a comparative statement covering a break-down of sales, variable costs, fixed costs and other operating expenses and final operating results. Individual items are converted to percentage of sales to enable projection of trends, and also to enable any significant ratio changes over the years to be picked up immediately for more detailed .examination, in time, of their causes. This exercise could alert the evaluator at an early stage of his work to any major bottlenecks which may exist. Examination of operational areas is taken up thereafter. A wide range of facts and opinions is subsequently narrowed down to well-documented issues on which the evaluator can base his appraisal. Data is collected through interviews, from company records and by written memoranda. The final report is a synthesis of the main findings, conclusions and recommendations, covering all the important operational areas. The areas covered in each report include finance, production, marketing, personnel management and organization, management information systems, research and development and future company plans and prospects. Production of concise readable reports of about twenty-five to thirty-five pages each is an important target. Lengthy reports could be counter-productive, especially so in the case of users with heavy pressures on time. An important reporting criterion is that material should be presented as simply as possible. Clearly written, concise texts were required, rather than profuse or incomprehensible data. The capacity to communicate clearly in terminology readers can understand is an indispensable asset needed by an Auditor General's performance evaluator. A survey of the important findings and recommendations spread over a few pages drawn up and placed towards the opening of each report. It is the key material for Public Accounts Committee deliberations.
The Public Accounts Committee formulates its own recommendations after completing formal hearing on the reports. Reports on about forty companies had been issued by May, 1983 of which two-thirds have already been examined by the Public Accounts Committee. The views and directives of the Committee did have an impact in increasing awareness on the part of company managements towards their responsibility for the highest possible executive efficiency. The Committee also expresed views from time to time on the format, content and usefulness of the reports, which were taken into account in modifying evaluation procedures and methodology.
There is no intention of holding any part of the existing evaluation or reporting modalities to be sacrosanct. Possibilities for change and improvement will continue to be assessed and re-assessed as an integral part of the Cell's operations. Development and implementation of performance evaluation methodology upto its present state has, however, been a significant devlopment in recent years in the operations of the Pakistan Audit Department.