<figure><img src="image_84.png" /></figure>

Chapter 13

The Role of Financial Literacy
on Retirement Preparedness in Brunei
Darussalam

Pg Md Hasnol Alwee Pg Hj Md Salleh and Roslee Baha

**Abstract** In this chapter, the role of financial literacy vis-à-vis retirement preparedness in Brunei Darussalam is assessed through structured interviews with 700 public sector employees. The analysis examines not only their retirement preparations but also the challenges or concerns they foresee in retirement. An attempt is also made to understand the justifications of those without an additional retirement plan. Using Pearson's chi-squared test, the results indicate that financially literate respondents are more knowledgeable about retirement needs, attend financial seminars and invest further into their retirement schemes on a voluntary basis. For those with an additional retirement plan, financially literate respondents also tend to seek professional guidance, and include land and insurance in their retirement plans to a greater extent compared to less financially literate respondents. For those without an additional plan, other current pressing commitments and the availability of family support are the main justifications. Despite the limitations of purposive sampling, the chapter underlines the value of financial literacy in retirement planning, which provides impetus for policymakers to incorporate financial literacy initiatives in the workplace, education system and other teachable opportunities, notably for older employees who earn relatively modest salaries and possess lower educational attainment.

**Keywords** Brunei Darussalam • Public sector employees • Financial literacy • Pension schemes • Retirement planning • Insurance • Family support

<footnote>Pg Md Hasnol Alwee Pg Hj Md Salleh (✉) • Roslee Baha
UBD School of Business and Economics, Universiti Brunei Darussalam, Gadong, Brunei
Darussalam
e-mail: hasnol.salleh@ubd.edu.bn</footnote>

<footnote>Roslee Baha
e-mail: roslee.baha@ubd.edu.bn</footnote>
**13.1 Introduction**

The challenge of preparing for retirement lies in the uncertainty of the future and its assumptions such as life expectancy, possible investment returns and post-retirement needs. Despite these uncertainties, retirement remains an important event that should be planned for. As employability diminishes with age, it is critical to ensure sufficiency of post-retirement resources to avoid financial difficulties, an adverse social impact on families and dependency on welfare payments in old age.

In Brunei Darussalam, the two main retirement schemes for government employees prior to 1993 were the government pension scheme and the old age pension. The government pension scheme was a defined benefit plan with retirees attaining at least 75% of their final salary as lifetime income (Hajah Sainah 2010). The old age pension is a universal pension scheme applicable to all Bruneians provided they reach the age of 60, and are either born in Brunei and resided in the country for at least 10 years or born outside Brunei but resided in the country for at least 30 years (AGC 2017). In 1993 the retirement scheme changed from the government pension to a defined contribution plan named Tabung Amanah Pekerja, compulsory for local employees in both the public and private sectors, with few exceptions. This scheme involved compulsory contributions by participants at the rate of 5%, matched by the employer at the rate of 5% (AGC 1993). Further, participants may voluntarily provide additional contributions to their Tabung Amanah Pekerja account, though employers are not required to match these voluntary contributions. The old age pension remains in place in Brunei and falls under the jurisdiction of the Ministry of Culture, Youth and Sports (AGC 2017).

In January 2010 an additional defined contribution plan scheme referred as the supplemental contributory pension was introduced under the Supplemental Contributory Pensions Order 2009, S58 (AGC 2009). Similar to Tabung Amanah Pekerja, the supplemental contributory pension is a defined contribution plan that requires compulsory contributions by participants and is matched by the employer. Similarly, participants may voluntarily add further contributions which employers are not required to match. However, a difference is that the principal and returns from Tabung Amanah Pekerja are provided to participants at the age of 55 (the previous retirement age), while the supplemental contributory pension is an annuity with monthly disbursement provided at the age of 60 for a period of 20 years (ibid.; Tabung Amanah Pekerja 2023). Aside from the supplemental contributory pension, 2010 also witnessed a change in the retirement age, which was increased from 55 to 60 years under the Retirement Age Order 2010, S4 (AGC 2010).

Given the prevalence of defined contribution plan schemes in Brunei, it should be noted that the sufficiency of the defined contribution plan schemes (Tabung Amanah Pekerja and supplemental contributory pension) to fulfil retirement needs partly depends on the principal invested and investment returns. This highlights the importance of understanding aspects of personal finance in general and financial literacy in particular. The Organisation for Economic Co-operation and Development (2018: 4) defines financial literacy as '[a] combination of awareness, knowledge, skill, attitude
and behaviour necessary to make sound financial decisions and ultimately achieve
individual financial wellbeing. Arguably, the more financially literate an individual
is the likelier the chances of a better financial outcome and enhanced well-being.

With regard to financial knowledge, numerous studies have analysed the relation-
ship between financial literacy and retirement. For instance, in the United States,
Annamaria Lusardi and Olivia S. Mitchell (2011a) find that financially literate
respondents were more likely to plan and succeed in their retirement, relying on
formal retirement tools, compared to less financially literate respondents who relied
on family or co-workers. In Germany, Tabea Bucher-Koenen and Lusardi (2011)
similarly report that those with higher financial literacy were associated with retire-
ment planning. In Singapore, financial literacy is linked to respondents holding a more
diversified investment portfolio, higher net financial wealth and insurance uptake for
those approaching retirement (Koh and Mitchell 2019; Koh et al. 2021).

The emphasis on financial literacy has led to government initiatives, including
the creation of frameworks to include financial literacy in the educational system
and the declaration of a ‘financial literacy month’ in Canada. In the United States,
increased concerns about financial illiteracy led to the establishment of the Finan-
cial Literacy and Education Commission and April was proclaimed as the National
Financial Literacy Month (US Treasury 2024; Jump$tart 2024). As of 2024 there are
35 states in the United States that require high school students to take a course in
personal finance to graduate (Council for Economic Education 2024). In Singapore, a
national financial education programme known as MoneySense was created in 2003
to promote sound financial decision-making and longer-term planning (MoneySense
2024). In Malaysia, the importance of this issue is reflected in the creation of the
National Strategy for Financial Literacy 2019–2023 (Financial Education Network
2019).

In view of the importance of retirement preparedness, there is a need to understand
the role that financial literacy plays in relation to it. This chapter aims at ascertaining
insights on the role of financial literacy for the retirement preparedness of public
sector employees in Brunei. The discussion is organised as follows. A survey of
the existing literature is detailed in Sect. 13.2, followed by the research design and
summary profile in Sects. 13.3 and 13.4. Key findings and conclusions are presented
in Sect. 13.5.

**13.2 Review of Literature**

Recent decades have witnessed growing interest in financial literacy, especially given
its benefits. Studies of financial literacy, such as that by Lusardi and Mitchell (2007),
indicate that those knowledgeable in financial matters, such as compounding, tend to
plan their finances and this affects wealth accumulation. In terms of debt, individuals
who are less financially literate are likely to pay higher fees and experience the high
cost of borrowing and are likely to engage in negative credit card behaviour, such
as incurring late fees and over-the-limit fees (Mottola 2013; Lusardi and Tufano
2015). Where financial distress on debt is concerned, Lusardi et al. (2018a) find that those with higher financial literacy were less exposed to financial distress as they approached retirement compared to those less financially literate who had excessive debt. Managing debt is especially important at a time when individuals are likely to possess more debt in old age compared to the previous generations (Lusardi et al. 2018b). In terms of financial fragility in old age or where financial emergencies are concerned, Benedict Koh et al. (2021) suggest that those who are financially literate and aged between 50 and 70 years were more likely to hold long-term care and health insurance, enhancing their well-being in retirement. Further, financial literacy leads to active participation in the stock market, potentially enhancing retirement returns, and is also linked to possessing a more diversified investment portfolio and higher net wealth (Mahzdan et al. 2017; Koh and Mitchell 2019).

In other studies, seemingly basic financial questions highlight alarming issues of financial illiteracy. In assessing early baby boomers, aged 51–56, Lusardi and Mitchell (2007) report that 17.8% were able to correctly answer a basic compounding question (compound interest) and only 55.9% accurately answered a question related to divisions (lottery division).<fnref n="1" /> Knowledge of compounding is found to be the most important variable, among the four types of questions asked, as it is statistically significant across groupings of retirement planners, while those who were not able to answer the ‘lottery division’ question correctly were likely to be non-planners. In more complex aspects of retirement decision-making, Căzilia Loibl et al. (2018) suggest that financially literate respondents were able to make better decisions in choosing retirement options, since the financially literate were able to take into account complex annuity-linked considerations to make an effective decision. Similar findings on the value of financial literacy vis-à-vis retirement planning, including the causality effect of financial literacy towards retirement planning, can be found in Bucher-Koenen and Lusardi (2011), Lusardi and Mitchell (2011b, 2017) and David Boisclair et al. (2017).

Where retirement planning is concerned, Lusardi and Mitchell (2007) find that planning is associated with wealth holdings; those who planned their retirement were relatively well-off compared to those who did not. Harold W. Elder and Patricia M. Rudolph (1999) hypothesise that those who did not plan for retirement may belong to the ‘surprise group’, finding retirement funds insufficient to sustain their lifestyle and forced to make downward adjustments to their spending patterns. Their findings indicate a positive relationship between retirement planning and retirement satisfaction, even as income, health, marital status and wealth are taken into account. Similar findings are found in the Certified Financial Planner Board of Standards segmentation survey in which high-income earners and those with high levels of educational attainment were found to be more positive on their future well-being if they started saving for retirement at an early age (CFP Board 2016). The importance of preparing

<footnote n="1">¹ Compound interest: Let's say you have 200 dollars in a savings account. The account earns 10% interest per year. How much would you have in the account at the end of two years? Lottery division: If five people all have the winning number in the lottery and the prize is USD2 million, how much will each of them get?</footnote>
for retirement is also substantiated by financial customers. When respondents were asked their motivation for hiring a financial professional and the rationale for beginning to plan their finance, they appeared to rank retirement planning or a desire to build a retirement fund as the main reason (CFP Board 2004, 2009, 2012).

In planning for retirement, Lewis J. Altfest (2017) highlights numerous steps undertaken in financial planning to ascertain if retirement funds are sufficient, given current savings and retirement schemes. These include computing the desired amount for retirement, assessing current assets and investing if current assets fall short of the desired amount. With regard to investing, two financial concepts fundamental to achieving the investment objectives are compounding and diversification. Given the long-term nature of investing for retirement, the benefits of diversification and compounding in uncertain long-term investments cannot be underestimated. It is therefore not surprising these two concepts are used in numerous financial literacy studies to ascertain respondents' level of financial literacy, including Lusardi and Mitchell (2011c) and the 2014 Standard and Poor's Ratings Services global financial literacy survey (Global Financial Literacy Excellence Center n.d.).

Aside from acknowledging the potential benefits of financial literacy, studies have also underlined those currently at a disadvantage or facing low financial literacy. In the United States, studies have indicated low levels of financial literacy among certain groupings; Hispanic as well as African American students/adults are less financially literate than white students/adults, and women are also found to have lower financial literacy scores than men, notably African American and Hispanic women (NCOEE 2005; Yakoboski et al. 2020; Clark et al. 2021).

There are relatively few published studies examining retirement preparedness in Brunei. Pg Md Hasnol Alwee (2013) assesses savings motives of welfare and non-welfare recipients in the largest district, Brunei-Muara, and finds non-welfare recipients or those with surplus cash highlighted savings for retirement or old age as one of the top three reasons for savings. However, when asked whether they had a financial plan, 80% of welfare recipients and 57% of non-welfare recipients stated they had none. The lack of a retirement plan for non-welfare recipients is not surprising as high-income earners are 2.1 and 2.7 times more likely to plan for retirement compared to middle-income and low-income earners respectively. When assessed on knowledge of retirement planning, high-income earners were 4.75 times more likely to answer the question correctly than low-income earners, highlighting the relationship of earnings with retirement planning knowledge (ibid.). It is also found that the private sector, self-employed, and those working in agriculture and fisheries were 2.37 times more likely to save for retirement (excluding Tabung Amanah Pekerja and supplemental contributory pension) compared to government sector employees. This is interesting because the government had introduced the supplemental contributory pension aimed at increasing retirement savings, notably for lower-paid employees. It is therefore possible that government employees were underestimating their retirement needs compared to non-government employees. However, these findings are not generalisable to the Bruneian population due to the non-random sampling nature of the study.
There has been an increasing emphasis on improving financial literacy since the mid-2010s led by the Brunei Darussalam Central Bank (previously known as Autoriti Monetari Brunei Darussalam [AMBD]). In 2015, 28 May was proclaimed National Savings Day in Brunei and has been celebrated annually ever since. The same year, the AMBD commissioned the financial literacy survey and national strategy project to assess financial literacy. In 2016 the Financial Planning Association of Brunei Darussalam was established to raise awareness on financial planning (BruDirect 2016), followed by the sultan establishing the National Financial Literacy Council (NFLC) in 2017, aimed at ensuring ‘the people of Brunei Darussalam are able to reach the highest level of financial well-being, in line with Wawasan Brunei 2035 to have highly knowledgeable and skilled citizens, with an enhanced quality of life as well as a more sustainable economic growth. Financial literacy is achievable through the provision of access to quality and trusted products, information and advisory services.’ (Ministry of Education 2022). More recently, the Ministry of Education, which is part of the secretariat to the NFLC, along with the Central Bank and Tabung Amanah Pekerja, launched the Brunei Darussalam Financial Literacy Competency Framework for School Children and Adults in April 2021 (Ministry of Education 2021). The Central Bank is also active in promoting National Savings Day programmes which aim to promote a savings culture, highlight the importance of prudent financial management and increase awareness on financial products and services in Brunei (BDCB n.d.).

## 13.3 Research Design

This quantitative study utilises proxies of financial literacy via financial knowledge questions similar to Lusardi and Mitchell (2007) and Lusardi et al. (2014). However, certain aspects of the questions differ as the context of this study is more geared towards retirement planning rather than a general inquiry on financial well-being. To gauge financial literacy, three questions were posed and responses were noted as ‘financial sophistication 3’ if all three questions were answered correctly, ‘financial sophistication 2’ for two correct answers and so on.

**Question 1 (Compounding)**

Let's say you have BND100 in a savings account. The account earns a 10% return per year. How much would you have in the account at the end of two years? [BND110/BND115/BND120/BND121**/None of the above/I don't know]

**Question 2 (Mutual fund)**

A mutual fund is: [Similar to a savings account/Similar to a fixed deposit/Similar to a bond/sukuk/None of the above**/I don't know]

**Question 3 (Diversification)**

In general, when an investor spreads money between 20 stocks, rather than two, the risk of losing a lot of money: [Increases/Decreases**/Does not change/I don't know]
Questions 1 and 3 are adopted from financial literacy studies, gauging compounding and diversification knowledge respectively (Lusardi and Mitchell 2007; Lusardi et al. 2014). Question 2 is ascertained given that investing in a mutual fund would provide a cost-efficient approach to investment for Bruneians compared to individual stocks.<fnref n="2" />

Pearson's chi-squared test is used to ascertain significant relationships between groupings and selected variables; use of the chi-squared test and logistics regression is pertinent considering categorical variables were involved (Pallant 2020). In terms of sampling, the study is based on a cross-sectional design employing structured interviews and purposive sampling of 780 government employees in 2016. Out of 780 interviews, 686 (88%) were deemed valid.

## 13.4 Summary of Respondents' Profiles

To provide a summary of profiles, respondents are divided into those who answered at least one question correctly ('financial sophistication 1') and those who did not answer any question correctly ('no correct answers') (Table 13.1). In terms of similarities, across both groupings the majority (over 90%) are Malay and male (67%). With regard to marital status, both groupings are largely composed of married respondents (around 60%), though there are 10% more respondents who are single who fall into the 'financial sophistication 1' group.

The mean shows the differences in age are minimal, around four years apart; however, the median indicates the differences are larger with a 13-year gap between the two medians, indicating the 'financial sophistication 1' group is relatively younger. In terms of education, there is a sizeable proportion (46%) of 'financial sophistication 1' respondents who have at least a bachelor's degree, while the largest proportion of the 'no correct answers' group have a pre-college qualification (36%). In terms of government employees, nearly half of the 'financial sophistication 1' respondents are in division 1 and 2 (42%), while a sizeable portion of the 'no correct answers' respondents are in division 4 (42%).<fnref n="3" />

In line with these descriptive statistics, Pg Md Hasnol Alwee and Roslee Baha (2020) affirm through logistic regression that, in this sample, the financially literate respondents are those who have higher education, are younger and have relatively high salaries/posts. In the next section, findings on the role of financial literacy on their additional retirement plans and perceived challenges are highlighted.

<footnote n="2">² This question may appear basic, but during the interviews conducted by Pg Md Hasnol Alwee (2013), some respondents faced significant challenges in understanding the mutual fund concept, which required the question to be amended to a simplified context.</footnote>

<footnote n="3">³ In Brunei, division 1 is the highest level of classification for government employees with higher salary levels and positions.</footnote>
<table><caption>Table 13.1 Financial literacy: Summary of respondents' profiles</caption><thead><tr><th>Variable</th><th></th><th>N</th><th>Mean</th><th>Median</th></tr></thead><tbody><tr><td rowspan="3">1 Age</td><td>Financial sophistication 1</td><td>308</td><td>36.30</td><td>32</td></tr><tr><td>No correct answers</td><td>378</td><td>40.56</td><td>45</td></tr><tr><td>Male</td><td>Female</td><td>Total</td><td></td></tr><tr><td>Financial sophistication 1</td><td>204 (66%)</td><td>104 (34%)</td><td>308 (100%)</td></tr><tr><td>No correct answers</td><td>254 (67%)</td><td>124 (33%)</td><td>378 (100%)</td></tr><tr><td>Total</td><td>458 (67%)</td><td>228 (33%)</td><td>686 (100%)</td></tr><tr><td rowspan="3">3 Marital status</td><td>Single</td><td>Married</td><td>Divorced/widowed</td><td>Total</td></tr><tr><td>Financial sophistication 1</td><td>122 (100%)</td><td>178 (58%)</td><td>8 (2%)</td><td>308 (100%)</td></tr><tr><td>No correct answers</td><td>114 (30%)</td><td>254 (67%)</td><td>10 (3%)</td><td>378 (100%)</td></tr><tr><td>Total</td><td>236 (34%)</td><td>432 (63%)</td><td>18 (3%)</td><td>686 (100%)</td></tr><tr><td rowspan="4">4 Education</td><td>Up to Year 9</td><td>Pre-college</td><td>College/ Diploma</td><td>Advanced/Higher National Diploma</td><td>Bachelor's degree/Postgrad</td><td>Total</td></tr><tr><td>Financial sophistication 1</td><td>11 (4%)</td><td>46 (15%)</td><td>41 (13%)</td><td>66 (21%)</td><td>143 (46%)</td><td>307 (100%)</td></tr><tr><td>No correct answers</td><td>35 (9%)</td><td>135 (36%)</td><td>73 (19%)</td><td>46 (12%)</td><td>88 (23%)</td><td>377 (100%)</td></tr><tr><td>Total</td><td>46 (7%)</td><td>181 (27%)</td><td>114 (17%)</td><td>112 (16%)</td><td>231 (34%)</td><td>684 (100%)</td></tr><tr><td rowspan="3">5 Race</td><td>Malay</td><td>Chinese</td><td></td><td></td><td>Others</td><td>Total</td></tr><tr><td>Financial sophistication 1</td><td>282 (92%)</td><td></td><td>21 (7%)</td><td></td><td>5 (1%)</td><td>308 (100%)</td></tr><tr><td>No correct answers</td><td>367 (97%)</td><td></td><td>4 (1%)</td><td></td><td>7 (2%)</td><td>378 (100%)</td></tr></tbody></table>

(continued)
<table><caption>**Table 13.1** (continued)</caption><thead><tr><th>Variable</th><th>N</th><th>Mean</th><th>Median</th></tr></thead><tbody><tr><td>Total</td><td>649 (95%)</td><td>25 (4%)</td><td>686 (100%)</td></tr><tr><td><strong>6 Division</strong></td><td>Division 1 &amp; 2</td><td>Division 3</td><td>Division 5</td></tr><tr><td>Financial sophistication 1</td><td>130 (42%)</td><td>108 (35%)</td><td>17 (6%)</td></tr><tr><td>No correct answers</td><td>84 (18%)</td><td>104 (26%)</td><td>37 (15%)</td></tr><tr><td>Total</td><td>214 (32%)</td><td>213 (31%)</td><td>54 (8%)</td></tr></tbody></table>

Source: Authors' calculations
# 13.5 Key Findings

## 13.5.1 Is Financial Literacy Linked to Retirement Preparedness?

In ascertaining if financial literacy is associated with a better sense of retirement preparedness, this section assesses whether (1) respondents who possess some level of financial literacy know how much is needed upon retirement, and (2) they pursue any activities to prepare for their retirement aside from the existing default retirement schemes. The statistical differences of these variables are shown in Table 13.2. Those with statistical significance are in bold, indicating differences between respondents under ‘financial sophistication 1’ and those with ‘no correct answers’.

In terms of whether respondents had calculated the amount needed for retirement, there is a statistically significant difference between those who were financially literate (‘financial sophistication 1’) and those less financially literate (‘no correct answers’) (Fig. 13.1). There is a higher incidence of financially literate respondents who stated they had attempted to calculate the amount needed for retirement (50%) compared to less financially literate respondents (38%).

Once an individual knows how much is needed for retirement, they may decide to undertake actions voluntarily to achieve the amount needed. In this study, respondents were assessed on whether they attended financial seminars/roadshows and made voluntary contributions to their Tabung Amanah Pekerja and/or supplemental contributory pension (for those with the relevant schemes).

Figure 13.2 shows that those financially literate (‘financial sophistication 1’) were more likely to attend financial seminars, roadshows and briefings (53%) compared to those less financially literate (35%). There were also incidences of financially literate respondents who made additional voluntary payments to their Tabung Amanah Pekerja and/or supplemental contributory pension schemes, though the figures are

<table><caption>**Table 13.2** Chi-squared results: Retirement preparation</caption><thead><tr><td>No</td><td>Source of financial advice</td><td>Results</td></tr></thead><tbody><tr><td>1</td><td>Have you ever tried to calculate how much you need to save for retirement?</td><td>χ<sup>2</sup> (2) = 10.244, p &lt; 0.05</td></tr><tr><td>2</td><td>Have you ever attended any seminars, roadshows or briefings on financial literacy, financial awareness or planning?</td><td>χ<sup>2</sup> (1) = 23.235, p &lt; 0.00</td></tr><tr><td>3</td><td>Aside from the Tabung Amanah Pekerja percentage paid by yourself, do you make any voluntary contributions to Tabung Amanah Pekerja?</td><td>χ<sup>2</sup> (1) = 11.352, p &lt; 0.05</td></tr><tr><td>4</td><td>Aside from the supplemental contributory pension percentage paid by yourself, do you make any voluntary contributions to supplemental contributory pension?</td><td>χ<sup>2</sup> (1) = 8.315, p &lt; 0.05</td></tr></tbody></table>
<figure><img src="image_85.png" /><figcaption>**Fig. 13.1** Respondents who tried to calculate retirement needs (%). *Source* Authors' calculations</figcaption></figure>

<figure><img src="image_86.png" /><figcaption>**Fig. 13.2** Respondents who attended financial events (%). *Source* Authors' calculations</figcaption></figure>

relatively low. Figure 13.3 shows a higher proportion of financially literate respondents who had a Tabung Amanah Pekerja and/or supplemental contributory pension contributed to their schemes voluntarily (11–16%) compared to those who were less financially literate (5–7%). Note that similar findings were also found when ‘financial sophistication 2’ were assessed against attending financial events and making voluntary payments; a higher proportion of those financially literate attended financial events and contributed additional funds to their Tabung Amanah Pekerja and/or supplemental contributory pension schemes.<fnref n="4" />

Aside from the nature of preparation for retirement, the quality of respondents’ preparedness is also gauged through the additional retirement plan created on top of their default retirement schemes, as the chi-squared results indicate (Table 13.3). Figure 13.4 shows that although both groups of respondents have an additional retirement plan (around 40% of respondents), the quality differs in terms of the input from professionals. Of those with an additional retirement plan, there is a higher proportion of ‘financial sophistication 1’ respondents (53%) who have plans prepared with assistance from a financial professional compared to those with lower levels of financial literacy (28%). Similar findings are also found vis-à-vis ‘financial sophistication 2’.<fnref n="5" />

<footnote n="4">⁴ The specific figures and chi-squared results are available upon request.</footnote>

<footnote n="5">⁵ The specific figures and chi-squared results are available upon request.</footnote>
<figure><img src="image_87.png" /><figcaption>**Fig. 13.3** Respondents with voluntary Tabung Amanah Pekerja and/or supplemental contributory pension payments (%). *Source* Authors' calculations</figcaption></figure>

<table><caption>**Table 13.3** Chi-squared results: Quality of retirement preparation</caption><thead><tr><td>No</td><td>Source of financial advice</td><td>Results</td></tr></thead><tbody><tr><td>1</td><td>Yes, aside from my Tabung Amanah Pekerja/supplemental contributory pension/government pensions, I have other preparation for my retirement</td><td>χ<sup>2</sup> (1) = 1.183, p > 0.10</td></tr><tr><td>2</td><td>Yes, a financial professional helped me to prepare this plan</td><td>χ<sup>2</sup> (2) = 21.539, p < 0.00</td></tr></tbody></table>

<figure><img src="image_88.png" /><figcaption>**Fig. 13.4** Respondents and additional retirement plans (%). *Source* Authors' calculations</figcaption></figure>

### 13.5.2 Is Financial Literacy Linked to Lower Retirement Concerns?

The value of financial literacy is also notable when concerns of meeting expenses and basic needs in retirement were assessed against those possessing ‘financial sophistication 1 and 2’, that is those correctly answering at least one question and two questions respectively. This is indicated in Table 13.4 as all four relationships are statistically significant.
<table><caption>**Table 13.4** Chi-squared results: Meeting basic needs and general expenses upon retirement</caption><thead><tr><td>No</td><td>Retirement needs</td><td>Results</td></tr></thead><tbody><tr><td>1</td><td>Financial sophistication 1 versus meeting basic needs</td><td>χ<sup>2</sup> (2) = 15.524, p < 0.00</td></tr><tr><td>2</td><td>Financial sophistication 1 versus meeting retirement expenses</td><td>χ<sup>2</sup> (2) = 19.918, p < 0.00</td></tr><tr><td>3</td><td>Financial sophistication 2 versus meeting basic needs</td><td>χ<sup>2</sup> (2) = 14.352, p < 0.05</td></tr><tr><td>4</td><td>Financial sophistication 2 versus meeting retirement expenses</td><td>χ<sup>2</sup> (2) = 17.911, p < 0.00</td></tr></tbody></table>

Figure 13.5 shows respondents who answered at least one question correctly were more confident of meeting their two retirement needs (expenses and basic needs) compared to respondents who were less financially literate. With regard to basic needs, 60% of those who were either confident or very confident could answer at least one question correctly compared to 46% of those who could not answer any questions correctly.

Additionally, there is a higher incidence of respondents being confident/very confident in meeting retirement expenses (46%) if they answered at least one question accurately compared to those who could not correctly answer the questions (31%). Similar trends were found when retirement concerns were assessed against 'financial sophistication 2' (Fig. 13.6). As a whole, these findings indicate the importance of financial literacy in mitigating retirement concerns.

In terms of specific retirement concerns, Table 13.5 shows all the groups shared similar specific retirement concerns, with the top three concerns being rising cost of living, sudden expenses in retirement and cost of education for their children. The only difference can be found when the cost of health care as a concern was

<figure><img src="image_89.png" /><figcaption>**Fig. 13.5** Respondents confident/very confident of meeting basic needs and general expenses in retirement, by 'financial sophistication 1' (%). Source Authors' calculations</figcaption></figure>

<figure><img src="image_90.png" /><figcaption>**Fig. 13.6** Respondents confident/very confident of meeting basic needs and general expenses in retirement, by 'financial sophistication 2' (%). Source Authors' calculations</figcaption></figure>
assessed against financial literacy with both ‘financial sophistication 1 and 2’ being statistically significant (Table 13.6).

Figures 13.7 and 13.8 show a higher proportion of the financially literate were concerned on their health care during retirement. For instance, Fig. 13.8 shows 53% of those answering at least two questions correctly were concerned with health care costs in retirement, while only 32% of those who were less financially literate felt the same. Such concerns are interesting considering public health care for Bruneian citizens is generally accessible with a nominal fee of BND1. A possible reason for this significant concern may lie with expectations of the future. Given Brunei’s dependency on oil exports and falling oil prices in recent times, these respondents may believe the cost of health care will increase, notably when old age brings about increased health concerns.

<table><caption>**Table 13.5** Weighted scores of ranked retirement concerns</caption><thead><tr><th>No</th><th>No correct answers</th><th>Score</th><th>Financial sophistication 1</th><th>Score</th><th>Financial sophistication 2</th><th>Score</th></tr></thead><tbody><tr><td>1</td><td>Rising cost of living</td><td>1.06</td><td>Rising cost of living</td><td>0.99</td><td>Rising cost of living</td><td>0.91</td></tr><tr><td>2</td><td>Unexpected expenses</td><td>0.83</td><td>Unexpected expenses</td><td>0.76</td><td>Unexpected expenses</td><td>0.74</td></tr><tr><td>3</td><td>Cost of children's education</td><td>0.53</td><td>Cost of children's education</td><td>0.58</td><td>Cost of children's education</td><td>0.67</td></tr><tr><td>4</td><td>Cost of health care</td><td>0.19</td><td>Cost of health care</td><td>0.24</td><td>Cost of health care</td><td>0.32</td></tr><tr><td>5</td><td>Unable to pay debt/credit</td><td>0.17</td><td>Unable to pay debt/credit</td><td>0.20</td><td>Unable to pay debt/credit</td><td>0.19</td></tr><tr><td>6</td><td>Cost of housing/rental</td><td>0.14</td><td>Cost of housing/rental</td><td>0.16</td><td>Cost of housing/rental</td><td>0.12</td></tr><tr><td>7</td><td>Falling returns on savings/investment</td><td>0.08</td><td>Falling returns on savings/investment</td><td>0.07</td><td>Falling returns on savings/investment</td><td>0.05</td></tr></tbody></table>

*Source* Authors’ calculations

<table><caption>**Table 13.6** Chi-squared results: Cost of health care, by financial sophistication</caption><thead><tr><th>No</th><th>Retirement concerns</th><th>Results</th></tr></thead><tbody><tr><td>1</td><td>Cost of health care versus financial sophistication 1</td><td>χ<sup>2</sup> (2) = 3.622, p < 0.10</td></tr><tr><td>2</td><td>Cost of health care versus financial sophistication 2</td><td>χ<sup>2</sup> (2) = 16.072, p < 0.00</td></tr></tbody></table>

*Source* Authors’ calculations
<figure><img src="image_91.png" /><figcaption>**Fig. 13.7** Respondents with concerns about health care cost, by ‘financial sophistication 1’ (%). *Source* Authors’ calculations</figcaption></figure>

<figure><img src="image_92.png" /><figcaption>**Fig. 13.8** Respondents with concerns about health care cost, by ‘financial sophistication 2’ (%). *Source* Author’s calculations</figcaption></figure>

**13.5.3 Do Financially Literate Respondents Have Different Composition of Assets in Their Additional Retirement Plan?**

As depicted earlier in Fig. 13.4, around 45% of respondents had an additional retirement plan. In terms of similarities between groups, Fig. 13.9 shows both groups had the highest proportion of respondents with four main assets in their retirement plans, namely savings, business, land and insurance. The data depict the variation of these assets among the grouping, with insights provided on land and insurance. With regard to land and insurance, there appears to be a higher proportion of those financially literate who included land and insurance in their retirement plans, which provides certain distinct advantages for those who are financially literate. Land is generally deemed a valuable asset due to price appreciation and the potential use to earn rental income, while insurance provides a buffer for sudden shocks.

With respect to differences, Table 13.7 shows that among the assets that respondents had in their retirement plans, three forms of assets were significantly different between those with at least one question correct ('financial sophistication 1') and those with no correct answer. These assets are land, insurance and mutual funds.
<figure><img src="image_93.png" /><figcaption>**Fig. 13.9** Concerns about retirement, by 'financial sophistication 1' (%). Source Authors' calculations</figcaption></figure>

<table><caption>**Table 13.7** Chi-squared results: Assets involved in retirement plan (aside from Tabung Amanah Pekerja/old age pensions/pensions), by 'financial sophistication 1'</caption><thead><tr><th>No</th><th>Assets</th><th>Results</th></tr></thead><tbody><tr><td>1</td><td>Land</td><td>χ<sup>2</sup> (1) = <strong>4.703</strong>, p < <strong>0.05</strong></td></tr><tr><td>2</td><td>Jewellery</td><td>χ<sup>2</sup> (1) = 0.023, p > 0.10</td></tr><tr><td>3</td><td>Business</td><td>χ<sup>2</sup> (1) = 0.270, p > 0.10</td></tr><tr><td>4</td><td>Savings</td><td>χ<sup>2</sup> (1) = 0.254, p > 0.10</td></tr><tr><td>5</td><td>Mutual funds</td><td>χ<sup>2</sup> (1) = <strong>4.352</strong>, p < <strong>0.05</strong></td></tr><tr><td>6</td><td>Stocks</td><td>χ<sup>2</sup> (1) = 0.140, p > 0.10</td></tr><tr><td>7</td><td>Bonds</td><td>χ<sup>2</sup> (1) = 1.352, p > 0.10</td></tr><tr><td>8</td><td>Insurance</td><td>χ<sup>2</sup> (1) = <strong>4.863</strong>, p < <strong>0.05</strong></td></tr><tr><td>9</td><td>Others</td><td>χ<sup>2</sup> (1) = 0.239, p > 0.10</td></tr></tbody></table>

Source Authors' calculations

### 13.5.4 The Lack of an Additional Retirement Plan among Financially Literate Respondents

Given that only around 45% of respondents in each grouping had an additional retirement plan, an attempt is made to understand the rationale for the remaining 55% for not having an additional plan. The three possible opinions put forward to respondents were: (1) their default pension is sufficient for them; (2) they have other pressing financial commitments; and (3) they place a measure of dependence on their family for future support. They were asked to select 'strongly disagree', 'disagree',
‘agree’, ‘strongly agree’ or ‘not sure’. Note that the responses shown in Fig. 13.10 only pertain to those who stated agreement, that is those who selected ‘agree’ and ‘strongly agree’ to the above three opinions.

Table 13.8 and Fig. 13.10 show the responses between those who did not get the financial literacy questions correct against the ‘financial sophistication 1’ group. Most respondents who had no additional plan acknowledged its importance but had other financial commitments. Here, a higher proportion of those financially literate (83%) acknowledged that having an additional plan was more important than the less financially literate (70%).

When ‘financial sophistication 2’ is taken in account, the only statistically significant variable relates to those who believed family support would be possible if a retirement shortfall occurred (Table 13.9). There is a higher incidence of ‘financial

<figure><img src="image_94.png" /><figcaption>**Fig. 13.10** Opinion of respondents on lack of additional retirement plan, by ‘financial sophistication 1’ (stated ‘agree’ and ‘strongly agree’) (%). Source Authors’ calculations</figcaption></figure>

<table><caption>**Table 13.8** Chi-squared results: Opinion of respondents on lack of additional retirement plan, by ‘financial sophistication 1’</caption><thead><tr><td>No</td><td>Expectations</td><td>Results</td></tr></thead><tbody><tr><td>1</td><td>I believe the amount of pension/Tabung Amanah Pekerja/supplemental contributory pension is sufficient for my retirement</td><td>χ<sup>2</sup> (2) = 3.818, p > 0.10</td></tr><tr><td>2</td><td>I believe having other additional retirement preparations, aside from pensions/Tabung Amanah Pekerja/supplemental contributory pension is important, but I currently have other financial commitments</td><td>χ<sup>2</sup> (2) = 7.768, p < 0.05</td></tr><tr><td>3</td><td>I believe that if there is a financial shortfall during my retirement, my family can support/assist me</td><td>χ<sup>2</sup> (2) = 4.553, p > 0.10</td></tr></tbody></table>

Source Authors’ calculations
<table><caption>**Table 13.9** Chi-squared results: Opinion of respondents on lack of additional retirement plan, by 'financial sophistication 2'</caption><thead><tr><td>No</td><td>Expectations</td><td>Results</td></tr></thead><tbody><tr><td>1</td><td>I believe the amount of pension/Tabung Amanah Pekerja/supplemental contributory pension is sufficient for my retirement</td><td>χ<sup>2</sup> (2) = 3.026, p > 0.10</td></tr><tr><td>2</td><td>I believe having other additional retirement preparations, aside from pensions/Tabung Amanah Pekerja/supplemental contributory pension is important, but I currently have other financial commitments</td><td>χ<sup>2</sup> (2) = 1.178, p > 0.10</td></tr><tr><td>3</td><td>I believe that if there is a financial shortfall during my retirement, my family can support/assist me</td><td>χ<sup>2</sup> (2) = 10.272, p < 0.05</td></tr></tbody></table>

Source Authors' calculations

<figure><img src="image_95.png" /><figcaption>**Fig. 13.11** Opinion of respondents on lack of additional retirement plan, by 'financial sophistication 2' (stated 'agree' and 'strongly agree') (%). Source Authors' calculations</figcaption></figure>

sophistication 2' respondents (34%) who proposed the possibility of family support compared to the relatively less financially literate (25%) (Fig. 13.11).

## 13.6 Discussion and Conclusion

Given the research undertaken that demonstrates the significance of financial literacy around the world, the same can be argued in the context of this sample in Brunei. Even though the respondents are not a representative sample, the findings do indicate the value of financial literacy given the relationship between financial literacy and variables such as retirement preparedness. In light of this, it is possible to contend that knowledge of personal finance is vital to prepare for retirement. For instance, knowing how to calculate the amount needed for retirement requires some understanding of compounding and, once calculated, an individual has a better idea of whether there is
sufficient income from the default retirement scheme. If deemed insufficient, a person is more likely to prepare effectively by, among other things, attending financial events or roadshows and making investments if needed through voluntary payments to a retirement scheme to supplement compulsory contributions. A good understanding of investments would also require knowledge of diversification and mutual funds, the latter being important for a country such as Brunei where there is currently no capital market for stocks and other such investment products.

Taken as a whole, such understandings of personal finance linked to retire-
ment, and the subsequent decisions that follow, would mitigate retirement concerns.
Further, the findings also indicate that financially literate respondents who have an
additional retirement plan would also have a quality retirement plan, given that they
tend to include the advice of a financial professional to prepare this additional plan.
They are also likely to include land and insurance, which would mean the existence
of an asset that appreciates over time and may provide rental income for retirement.
Land and insurance can also be used for emergency planning purposes should the
need to liquidate the land and file an insurance claim arise.

This study also investigates respondents without an additional retirement plan and finds that those without such a plan also include the financially literate. These people are likely to state either that they acknowledge the importance of an additional retirement plan but have other commitments ('financial sophistication 1' group) or that they have the financial support of family members should there be a shortfall in retirement income ('financial sophistication 2' group).

Aside from insights that emphasise the value of financial literacy, this analysis also suggests some areas for future research. The specific retirement concerns with cost-of-living standards, unexpected expenses and education costs are consistent across various groupings of financial literacy. Do the cost-of-living standards relate to inflation concerns, the lack of wage increases or other similar factors? Is the concern with unexpected expenses connected to a lack of emergency preparedness, through a dearth of savings and insurance? And do concerns about the cost of education and health care arise because of uncertain oil prices and government welfare sustainability? Aside from the specific concerns, the lack of an additional retirement plan also warrants further research. Qualitative research may be able to identify other reasons for not having an additional retirement plan and this may uncover factors outside of the remit of the current research.

As well as research on financial literacy, policy measures are equally important to consider. Based on the findings presented here, those with low-level financial literacy are relatively older, possess a pre-college qualification and are or have been employed in low-paying occupations. The challenge is that although Brunei is starting to manage financial illiteracy through public initiatives by the Central Bank and structural educational changes through the Ministry of Education, there is a transitionary period when the older, low-paying people and those with a more basic education may face retirement with low-level financial literacy and potentially insufficient retirement funds. The impetus here is the need for government policies to manage those who may get into financial difficulty in old age and fall into the 'surprise group' who realise their current standard of living is not sustainable after retirement. To
combat this, more data on retirement fund sufficiency and the number of years away from retirement are needed to consider potential solutions, such as the viability of voluntary investments, expansive financial literacy initiatives at the workplace, an increase in the retirement age or other such policy implications.

Overall, this chapter aims at understanding the value of financial literacy for a sample of respondents in Brunei. Its value lies in specific aspects of preparations to retire, concerns on reaching retirement age and the composition of assets in a retirement plan. However, this merely scratches the surface in understanding other aspects that may be insightful and may add further context to understanding retirement issues. Such contexts may include socioeconomic and policy-related factors such as understanding preparedness for sudden shocks in old age, and the need to manage low financial literacy and a lack of retirement planning for those approaching retirement.

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Pg Md Hasnol Alwee Pg Hj Md Salleh is an Assistant Professor at UBD School of Business and Economics, Universiti Brunei Darussalam. He graduated from Durham University, UK, with a PhD in Islamic finance. His research interests include financial literacy, personal finance and the intersection of these two areas with Islamic finance. Outside of academia, he is a working committee member of the Brunei Darussalam Financial Literacy Competency Framework for School Children and Adults and is a Shariah Advisory Body member for Bank Islam Brunei Darussalam At-Tamwil. He has published articles focusing on socioeconomic development in Brunei including: Retirement concerns and financial literacy in Brunei. *International Journal of Sociology and Social Policy* 40(3/4) (2020, with Roslee Baha); and, Inclusive Islamic financial planning: A conceptual framework. *International Journal of Islamic and Middle Eastern Finance and Management* 9(2) (2016, with Habib Ahmed).

Roslee Baha is a Lecturer in economics at UBD School of Business and Economics, Universiti Brunei Darussalam. In 20 years of service, he has developed and instructed courses at undergraduate and graduate levels, including managerial economics, public finance, labour economics and statistics for economics. He has also led workshops and courses on economics-related topics for government agencies and has undertaken consultancy projects for numerous organisations,
including the Agriculture and Agrifood Department, Tabung Amanah Pekerja and Narcotics Control Bureau. He has written research papers and book chapters on ageing, social security and development, including: Are formal institutions ineffective for firm performance? *International Journal of Sociology and Social Policy* 43(11/12) (2023, with Hazwan Haini and Pang Wei Loon); and, The economic and social progress of Brunei Darussalam. In *Routledge handbook of contemporary Brunei*, ed. Ooi Keat Gin and Victor T. King (2023, with Hartini Mohammad Yussof).

**Open Access** This chapter is licensed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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<figure><img src="image_96.png" /></figure>
Part III
Managing the Public Sector
<figure><img src="image_97.png" /></figure>

Chapter 14
Leading through Performance
Management in the Brunei Darussalam
Public Sector

Thuraya Farhana Said

**Abstract** Brunei Darussalam has been undergoing significant changes as it takes on national and international challenges, particularly in diversifying its economy. These changes have provoked the need for a shift in the style and methods of government administration. In order to accomplish these reforms, performance management was initiated, falling under the umbrella of new public management. The primary goal of performance management is to improve performance by setting individual and team goals that are aligned with National Development Plans and Wawasan Brunei 2035 (Brunei Vision 2035). Performance management practices, such as strategic planning, balanced scorecards and key performance indicators, have been integrated into public sector organisations in order to measure the attainment or otherwise of objectives and targets achieved. However, aligning goals with the different levels of management within public sector organisations has proved to be a multifaceted and non-linear process as organisations have historically diverse and complex roles and strategic goals. Despite performance management being perceived as a solution to improve the effectiveness and efficiency of the public sector, it is necessary to understand how this practice, developed in a Western context, can be implemented for improvement in developing countries like Brunei, especially with different political and institutional systems that might constrain its implementation. This chapter provides insights into how performance management was introduced and implemented within Brunei's public sector, and assesses the extent to which it has brought about intended changes in the organisations, that is whether performance management was implemented ceremonially or instrumentally.

**Keywords** Brunei Darussalam · Public sector reform · Performance management · Key performance indicators · Institutional change · Strategic alignment

<footnote>Thuraya Farhana Said (✉)
School of Business and Economics, Universiti Brunei Darussalam, Gadong, Brunei Darussalam
e-mail: farhana.said@ubd.edu.bn</footnote>
# 14.1 Introduction

In recent years, there has been significant recognition of new public management ideas and approaches for public sector reform in both developed and developing countries in order to improve efficiency and effectiveness. New public management, developed in a Western context in the 1980s, has contributed to the efficiency of public administration practice by using private sector tools and practices (Bevan and Hood 2006; Harun et al. 2012; Rana et al. 2021). Performance management, a central feature of new public management, has emerged as a critical element in modern public sector governance, including in Brunei Darussalam. Introducing performance management into the public sector consciously aims to direct employees' activities towards achieving organisational goals by instituting a quality planning process. Teresa Curristine (2008: 211) defines performance management as 'a management cycle under which program performance objectives and targets are determined, managers have the flexibility to achieve them, actual performance is measured and reported, and this information feeds into decisions about program funding, design, operations and reward, and penalties'. This practice contrasts with the guiding principles of traditional public administration, where performance is driven by adherence to rules and procedures and controlling inputs based on what is expected to happen rather than efficiency and results.

Performance management is underpinned by several theories, particularly goal setting and expectancy (Vroom 1964; Locke and Latham 2002). Goal setting theory highlights that connecting goals to performance outcomes can motivate employees because they know what is expected of them and, at the same time, can be guided in their performance (Simpson 2013; Locke and Latham 2019; Varma and Budhwar 2020). Goal setting theory is in line with the concept of management by objectives which is associated with a strategic planning process. This involves cascading organisational goals and objectives to the different levels of management and individuals within the organisation, thereby helping to align the efforts of all organisational members towards a common goal. On the other hand, expectancy theory suggests that individuals can be motivated to excel in work and, in turn, deliver if they believe there is a relationship between effort and performance (Sloof and Praag 2008; Lee 2019). Drawing on goal setting and expectancy theories has made performance measurement and appraisal integral elements of performance management. Performance measurement quantifies the input, output or level of activity of a project or process to enable an evaluation of the broad organisational goals and mission (Fryer et al. 2009; Lee 2019). First, it is vital for organisations to specify goals and indicators clearly to reduce ambiguity and confusion and allow organisational alignment. Aligning the performance measures and targets between organisational and individual levels can motivate employees to arrange their actions to attain the goals. Second, these goals and indicators must be evaluated to understand the organisation's performance. The next stage is where performance appraisal becomes essential to performance management as they link the performance and the reward expected. In this case, the performance measures, appraisal and rewards system must
be integrated. Otherwise, performance management can be meaningless without an apparent compensation for achieving the performance target.

Although studies reveal that many public sector organisations have undertaken new public management reforms, it should be noted that the reforms operate differently in various countries (Athmay 2008; Samaratunge et al. 2008; Harun et al. 2012; Sutheewasinnon et al. 2016; Nitzl et al. 2018; Lee 2019). The same applies to the practice of performance management, as scholars point out that contextual factors can moderate the effect of performance management in public sector reform. As a result, it is important to consider adapting performance management in light of the local organisational context due to differences in administrative and political structure, prevailing culture and fundamental needs (Bevan and Hood 2006; Koike 2013; Spekle and Verbeeten 2014; Lee 2019). Nevertheless, according to the Organisation for Economic Co-operation and Development (1997) and Curristine (2005), performance management has common objectives: efficiency and effectiveness, improved decision-making in the budget process and savings, and enhanced external transparency and accountability. While some countries have incorporated all these objectives (such as Britain, the United States and New Zealand), others may have rejected some and only embraced one or two (such as France, Lithuania and Indonesia) (Ferlie and Steane 2002; OECD 2002; Harun et al. 2012). The reason is that reforming according to new public management entails lessening or removing the contradictory nature or differences between public and private sectors to emphasise transparency, performance evaluation and accountability based on results (Bevan and Hood 2006; Pollitt and Bouckaert 2011). What will ensue is a fundamental shift in terminology and the basis of decision-making in the public sector. It can pose a challenge to the public sector's existing culture and identities to implement in its totality, as epitomised by Zoe Radnor and Mary McGuire (2004) posing the question regarding public sector reform in Britain: 'Performance management in the public sector: fact or fiction?'.

Nevertheless, developing countries, such as those in the Association of Southeast Asian Nations (ASEAN), began applying new public management ideas over the years. For example, Osamu Koike (2013) gathers public administration studies of Malaysia, Thailand, Singapore and Indonesia with regard to performance management, which was based on new public management reforms of the public sector (Table 14.1).

From Koike's data, the performance management experience in each country appears somewhat different in scope according to their context. Reform style and capacity are heavily influenced by different political, economic and social contexts, and so some reforms are subject to modification. While Malaysia, Singapore and Thailand introduced performance-based budgeting as part of their performance management initiative, this was not evident in the Indonesian public sector (ibid.; Jurnali and Siti Nabiha 2015). The idea of having budget reform was to achieve the efficiencies and resource savings by moving away from traditional and centralised line-item budgeting towards performance-based budgeting that can improve budget management and promote flexibility to focus on performance and results. Strategic planning tools such as performance agreements, performance measurement, balanced
<table><caption>**Table 14.1** Introduction of performance management initiatives in selected Asian countries</caption><thead><tr><td>Country</td><td>Programme</td><td>Key features</td><td>Year introduced</td></tr></thead><tbody><tr><td>Indonesia</td><td>Government agency performance accountability system</td><td>Five-year performance, annual performance agreement</td><td>1999</td></tr><tr><td>Malaysia</td><td>Integrated results-based management system</td><td>Results-based budgeting system, results-based personnel performance system</td><td>1999</td></tr><tr><td>Singapore</td><td>Performance-informed budgeting system</td><td>Ministry report cards, focus on outcome</td><td>2006</td></tr><tr><td>Thailand</td><td>Performance agreement, strategic performance-based budget</td><td>Four-year performance plan, balanced scorecard</td><td>2003</td></tr></tbody></table>

Source Osamu Koike (2013: 348)

scorecards, key performance indicators and performance reviews were used as part of performance management initiatives in Indonesia, Malaysia, Singapore and Thailand. Each country has also established a dedicated government agency with some organisational restructuring, whether in local or central government, to implement a performance management system in their public sectors, such as the Performance Management and Delivery Unit in Malaysia and the Office of Public Sector Development Commission in Thailand (Lorsuwannarat and Buracom 2011; Siddique 2012; Xavier 2014; Sutheewasinnon et al. 2016). The idea of having a dedicated agency points to the critical roles of leadership and top management support committed to implementing performance management, as they are the ones who will oversee and advise the process.

However, implementing performance management in the public sector is not without unintended and deliberate managerial consequences (Bevan and Hood 2006; Fryer et al. 2009; Jurnali and Siti Nabiha 2015; Modell 2004). For example, developing measures for public sector organisations' multifaceted nature is more challenging than for the private sector and using performance information can be complicated. Some authors critique that public sector organisations have measured too many things and the wrong things, which can lead to perverse learning instead of a positive one (Waggoner et al. 1999; Locke and Latham 2002; Modell 2008; Nakrošis 2008; Fryer et al. 2009; Waal and Counet 2009; Jurnali and Siti Nabiha 2015). As performance improves, indicators can lose their sensitivity in detecting bad performance or identifying areas that require attention, or organisations may use performance information to manipulate their evaluations. This can result in a performance paradox where the reports do not reflect the actual situation. Even with the concept of balanced scorecards that many public sectors have begun to apply as a framework for performance evaluation, Sven Modell et al. (2007) argue that its usage can be limited, or even fail, because of the complex range of stakeholders involved in the government administrative system. Also, though some governments have claimed that they
implemented performance-based budgeting and performance appraisal to support performance management reform, they were still loosely integrated (Hassan 2005; Athmay 2008; Norhayati and Siti Nabiha 2009; Jurnali and Siti Nabiha 2015). When this happens, it can serve little purpose and give minimal accountability to the organisation because it means performance targets can be disintegrated with resources, leading to performance indicators and information not being adequately set and used for improvement. As a result, performance management practice can become simply a data collection and reporting exercise rather than focusing on achieving efficiency and improving accountability (Nakrošis 2008; Jurnali and Siti Nabiha 2015; Surianti and Dalimunthe 2017).

In addition, ensuring the evolution of the right organisational management style and culture is vital to generating the desired behaviour within the public sector to produce improved performance (Nakrošis 2008; Nitzl et al. 2018). Organisational culture and management style can moderate the production and usage of information for the performance management process. Some studies find that the prerequisite result-oriented culture for performance management implementation was absent during public sector reform (Neely and Bourne 2000; Athmay 2008; Ferreira and Otley 2009; Jurnali and Siti Nabiha 2015; Fairul Rizal and Thuraya Farhana 2018; Harahap 2021). It becomes more about behaviour and procedural compliance than a real commitment to performance and has implications for the motivation to implement performance management. It is especially apparent when some public sectors used performance management tools, such as the ‘traffic light colours’ system for the balanced scorecards framework. Such a system tends not to be effectively used in a public sector organisation with high-power distance, hierarchical culture and high collectivism (Goh 2012; Fairul Rizal and Thuraya Farhana 2018; Harahap 2021). Studies show that hierarchical and high-power distance can inhibit employee ability to report and assess performance evaluation properly if the top management is not open to seeing actual progress, particularly regarding those targets in the ‘red’ zone that are not achieved. In some cases, the practice of performance management has resulted in impression management behaviour if there is pressure from the top management to show good progress and if there is a perception of possible punishment for failure. Christopher Pollitt (1986), Frank Ohemeng (2011) and Sanja Korac et al. (2020) believe that where there is a culture of blame, objective measurement becomes almost impossible since nobody wants accurate data made available. Employees may intentionally select and measure easier targets or suppress poor progress to show good progress, at the expense of the quality of the performance information provided and used.

Having proper integration of supporting reform policies is also essential for the performance management practice to influence the extent to which the performance information produced is used for organisational purposes. Some studies find that even though performance management practice existed in public sector organisations, the use of performance information was limited (Nakrošis 2008; Spekle and Verbeteen 2014; Nitzl et al. 2018; Korac et al. 2020). In other words, the performance information or results were not necessarily used—for making or supporting decision-making, improving public sector performance, determining budget allocations for resources
or rewarding good performance. As mentioned earlier, if the supporting policies are loosely integrated, performance management practice can be less instrumental and become a data collection and reporting exercise. However, because of the pressure on public sector organisations to introduce and implement performance management as a reform, conforming to it can make the organisation appear legitimate and accepted in the political arena. Yet if performance management is not perceived as beneficial for the organisational members, it can adversely affect all performance management processes and the organisational buy-in to performance management (Nor Aziah and Scapens 2007; Korac et al. 2020; Harahap 2021). In other words, it does not necessarily shift the attitudes and behaviour of organisational members to become more performance oriented. Another critical aspect is the implementer's knowledge and technical capacity to introduce performance management and its processes at the organisational or individual level. Without a complete knowledge of performance management, it can complicate and prevent implementing performance management to transform the public sector instrumentally and achieve performance management objectives.

Regardless of concerns raised by some studies on performance management in the public sector, there is still strong enthusiasm for implementing performance management and its uptake is also apparent in the Brunei public sector. This chapter's aim is to explore its implementation as there is little discussion in the literature about the commitment to performance management in the country. From an initial analysis of public media prior to 2012, little progress appears to have been made in the efficiency of resources despite the introduction of performance management. This study aims to contribute to knowledge about reform in the Brunei public sector by drawing on participants' experiences of how performance management practice has been adopted and implemented. It provides valuable insights for policymakers to understand the dynamics of performance management practice within the managerial, organisational and institutional context and the extent to which the adoption and implementation of performance management are instrumental. This chapter is divided into four parts. Section 14.2 describes when and how performance management was introduced in the Brunei public sector. Section 14.3 explores the key policies that support the implementation of performance management. Based on empirical findings, Sect. 14.4 presents insights into the nature of performance management implementation within some organisations. Section 14.5 provides a conclusion and some recommendations.

## 14.2 The Introduction of Performance Management in the Brunei Public Sector

The economy's over-dependency on the hydrocarbon industry has become a concern for Brunei. Economic diversification was adopted as a national plan goal as early as the 1960s, but it was only in the 1990s (almost a decade after independence) that efforts and attempts at diversification became more vigorously expressed (Bhaskaran
2010). However, diversification has proved incremental so far, which is surprising given that Brunei has considerable financial and infrastructure resources and a high degree of political stability (Neville 1985; Athmay 2008; Abdul Amin 2010). Brunei has not lacked for plans to diversify its economy, and some key industries, such as information technology, tourism, banking and finance, were identified to foster economic growth. However, not all plans could take off and progress has been much slower than anticipated, implying that the diversification plans were not easy to implement. This shortfall highlights the crucial role of the public sector in national development goals, but it seems that the centralised bureaucracy has taken its toll on the efficiency of the government, which has indirectly restrained diversification (Azaharaini 2007; Athmay 2008; Bhaskaran 2010; Lawrey 2010). An example is mentioned in an early report on diversification: ‘Brunei is unnecessarily slow and bureaucratic with respect to private sector activity. Brunei suffers from much need-less bureaucracy, red tape, and slow decision-making, affecting private businesses’ (Crosby 2007: 6).

The centralised bureaucratic system has set the policy environment for economic growth and development for a long time. It devised and implemented a succession of national development plans from 1954 to the present (Ismail and Tharumarajah 2010). In such an economy, where the public sector is considered the main agent of economic growth, it becomes imperative to have an efficient and effective bureaucracy, especially if it is by any measure large. It could be argued that if the size of the public sector is too large, it can lose its effectiveness in organising efficiency due to a high degree of formalisation and centralisation. In the case of Brunei, the dominance of the public sector in the labour market is evident, since most graduates opt to work in the sector due to a more reliable and sustained source of income (Siti Fatimahwati and Siti Rozaidah 2020). In 2019 the public-to-private sector employment ratio was around 40:60 and in 2022 it was 30:70 (DEPS 2019, 2022). The civil service was divided into five divisions: the first division for directors and managerial staff, including permanent secretaries, the second division for executives, the third for supervisory and skilled technical staff, and the fourth and fifth for support staff (Brunei Resources 2005). It thus became imperative for Brunei to improve its public sector efficiency due to its large size, especially since the public sector has experienced both success and failure with the National Development Plans. As a result, reform was deemed necessary in order to build an enabling environment for diversification to happen (Crosby 2007; Siddiqui 2012; Mohd Rozan and Milojević 2016).

Like neighbouring countries, Brunei has been subjected to many new public management ideas before performance management in the search for solutions to improve its public sector. A list of some reform policies and initiatives based on new public management ideas that were introduced and implemented is outlined in Table 14.2.

There are no apparent records of the success or otherwise of policies and initiatives introduced as reforms, as they were not disclosed to the public. However, according to previous studies, several reasons were identified that appeared to impede diversification progress from the public sector side: lack of ownership of programmes; lack of
<table><caption>**Table 14.2** Brunei Darussalam: Reform policies and initiatives for performance improvement</caption><thead><tr><td>Year</td><td>Programmes</td></tr></thead><tbody><tr><td>1988</td><td>Performance appraisal</td></tr><tr><td>1990</td><td>Review annual plans for public service</td></tr><tr><td>1992</td><td>Annual bonus</td></tr><tr><td>1993</td><td>Civil Service Excellence Award</td></tr><tr><td>1995</td><td>Clients Charter</td></tr><tr><td>2000</td><td>Civil Service Vision of 21st Century</td></tr><tr><td>2000</td><td>Annual report</td></tr><tr><td>2002</td><td>Manual work procedures</td></tr><tr><td>2003</td><td>National Strategic Alignment Programme</td></tr><tr><td>2007</td><td>Introduction of Wawasan Brunei 2035 (Brunei Vision 2035)</td></tr><tr><td>2014</td><td>Establishment of Peneraju Gagasan Gemilang untuk Rakyat (PENGGERAK, Piloting Exclusive National Goals, Gearing Excellent Results and KPIs) steering committee</td></tr><tr><td>2015</td><td>Public sector performance grading programme</td></tr><tr><td>2017</td><td>Performance management system</td></tr></tbody></table>

*Sources* Brunei Resources (2005), Pang (2017)

business management capability; lack of consultation and coordination among relevant key players; lack of commitment by senior leaders and the existence of some non-business-minded civil servants (Azaharaini 2007; Siddiqui 2012; Mohd Rozan and Milojević 2016). Ayman Adhair (2005: 24) also points out some common issues faced by governments of developing countries, including Brunei, which include ‘the role of the ministry is often not clearly stated; service delivery is generally poor, and performance measurement is not practiced efficiently’. These shortcomings highlight the need to cultivate effective organisational planning, aligning, monitoring and reviewing process. The importance of implementing the practice was recognised as early as the 1990s when the sultan gave a speech as a directive to the civil service: ‘Ministries must analyse and assess their existing organisational structure and policy planning in their respective ministries … to ensure they are meeting the needs and the requirement of the nation’ (Hajah Sainah 2005: 97).

The initial requirements of performance management in the public sector resulted in the introduction of the National Strategic Alignment Programme in 2003. The programme aimed to drive government organisations towards achieving the national vision via strategic planning with performance targets and justifying the organisational plans for budget allocation. However, it should not be assumed that there was no prior system measuring organisational performance. Organisational performance was assessed through annual reports, a financial statement audited by the auditor general, and individual performance was assessed through performance appraisal. However, the National Strategic Alignment Programme intended more transparency and effective coordination between ministries and with better tools. Since then, performance management tools such as balanced scorecards and key performance indicators,
<figure><img src="image_98.png" /><figcaption>**Fig. 14.1** Brunei Darussalam: Strategic planning process with performance management practices</figcaption></figure>

were introduced in public sector organisations to measure performance objectives and targets achieved or otherwise.

All public sector strategic plans were supposed to align with the Civil Service Vision of the 21st Century, which was introduced in 2000 (Brunei Resources 2005). However, in 2007, when the Brunei government introduced the Ninth National Development Plan (2007–2011), it prompted a shift in the strategic planning process. This plan was formulated to provide a long-term development framework of 30 years, in time becoming Wawasan Brunei 2035. Through this strategy, the government aspires to achieve an educated and highly skilled population, a high quality of life and a conducive business environment (Brunei Darussalam 2024). Starting in 2007, all strategic plans had to align with Wawasan 2035 and cascade down the government hierarchy from the ministry level to the division level (Fig. 14.1).<fnref n="1" /> However, there was a lack of attention to the integration of organisational-level and individual-level performance management.

The Ninth National Development Plan also highlighted a crucial issue that accompanied most of the country's plans—the implementation of development programmes and projects. Adhair's (2005) argument about the poor practice of performance measurement can be seen in the statistics of the Seventh National Development Plan (1996–2000), in which '53% were completed, 12% were approaching completion, and 12% were being implemented by the end of the Plan period, while the rest were either still at preliminary stages, suspended or cancelled' (see also Azaharaini 2007; Mohd Rozan and Milojević 2016). A similar concern was seen in the statistics of the Ninth National Development Plan, as reported by Ubaidillah Masli (2013) in the

<footnote n="1">¹ With performance management in the Brunei public sector, a three-level strategic planning system was put in place, linking long-, medium- and short-term strategic documents into one framework (Abdul Amin 2010). In the first stage, strategic planning attempted to systematically link the ministry's strategy to government strategy. For example, the national vision and the respective national development plan goals would be cascaded down to the ministry level and the incorporated into a five-year plan for each organisation. The five-year plan would include goals, key performance indicators and balanced scorecards. In implementing and executing strategy stage, action plans were established and risk analysis conducted in accordance with organisational strategies.</footnote>
*Brunei Times:* 'Two-third of projects (from) the 9th NDP would be carried forward to the 10th NDP (2012–2017), accounting for just 36% of the projects (in 9th NDP) approved and completed'.

To meet the need for better implementation of national development plans and projects, the executive committee of the Tenth National Development Plan (2012–2017) called for several public sector reforms to be introduced. The objectives to ensure transparency and accountability, especially in terms of more objective project and programme monitoring and evaluation, were included so that the implementation of the plan would be of a higher quality and achieve the targeted goals on time (DEPS 2012). In other words, efficient and robust governance in the public sector was seen as a catalyst in achieving Wawasan Brunei 2035. This view has implored the need for performance management to be implemented in public sector organisations over time by setting specific directions through strategic planning and objectives and measuring what has been accomplished, thereby ensuring that all public organisations are strategically focused on progressing the country according to its national vision and goal of diversification. The movement towards implementing performance management within public sector organisations has steadily gained importance over the last two decades, since the introduction of the National Strategic Alignment Programme. The programme was to have a biennial symposium for all government ministries to foster strategic alliances and coordination between them. The permanent secretaries and directors of ministries would attend and share their strategic plans, performance development and key results. Consequently, the organisations involved in the symposiums would work to align their strategies to the national vision, hoping to avoid wastage and duplication in the administration (MSD 2004, 2006). Before the programme started, most ministries did not have or produce strategic plans; as a consequence, every ministry attempted to introduce strategic plans and utilise performance management practices and tools to conform to the programme.

However, there was no standard rule or guideline on implementing performance management. Instead of a dedicated agency, only an ad hoc committee existed to guide performance management implementation and monitor strategic plans and reviews. It was up to each ministry and department to modify and make the existing strategic plan consistent with the government strategies. Nevertheless, a consultant was hired by the central government to help the ministries implement the national strategic alignment programme and performance management. In 2005 the guru of the balanced scorecard, Robert S. Kaplan, was invited to Brunei to educate its public sector and civil servants about balanced scorecards and how they could be used as a performance management tool. Although balanced scorecards were initially developed for profit-making organisations, it was suggested that they could be adapted for public sector organisations (Northcott and Taulapapa 2012). The balanced scorecard can serve a dual role in public sector contexts: as a measurement instrument to guide performance and a means of enhancing accountability and responsibility (Kaplan and Norton 1992; Goh 2012). Relevant training courses for performance management, such as strategic management and balanced scorecards, were and still are offered at
the Civil Service Institute, a government training institute, but have yet to be made compulsory for all officers, only for selected middle managers and above.

Unfortunately, the National Strategic Alignment Programme became inactive after a few years. The compilation of performance information and the gathering of ministries' top executives at the symposiums seemed challenging to implement.<fnref n="2" /> The National Strategic Alignment symposium was to be organised every two years starting in 2003, but since then, only two more symposiums have been held, in 2005 and 2007. The next one was supposed to happen in 2009, but it was postponed. The Management Services Department, which was directed to organise the symposium, had little authority to push for implementation as its role was an ad hoc committee-like function. In the three symposiums, not all ministries participated despite it being mandatory. There were also occasions when agencies were prompted not to discuss and share their strategic plans and progress due to 'confidentiality issues'. This view corroborates the findings of Mahani Hj Hamdan and K.C. Patrick Low (2013) on the wariness towards 'sensitive' issues within the Brunei government. To some extent, the concept of a strategic plan and performance management tools was not yet fully understood, which affected its implementation (Adhair 2005). Thus, in terms of capability, the poor readiness was reflected in the National Strategic Alignment symposium reports, despite improvements in each symposium. By 2007 the symposium report shows that the use of performance management tools, such as balanced scorecards, was still at an unsatisfactory level, and key performance indicators were unclear and inconsistent within the strategic plans. As a result, over the years performance management's role became of utmost importance as the sultan has repeatedly mandated through his speeches that his ministries employ performance management-related tools, such as performance measurements or key performance indicators, to assess their project's performance. For example, in conjunction with the sultan's 64th birthday in 2010, he declared: 'I want our civil service, on an ongoing basis, to assess the strengths and weaknesses based on the key performance indicators that respective ministries and departments have set ... can measure the extent to which the civil service is unable to perform its obligations and meet the expectations of the public' (PMO 2012). Ten years later, in conjunction with Brunei's 28th National Day celebration in 2020, the sultan declared: 'In our journey towards achieving the target of Vision 2035, we need to be more agile and assertive. Any target missed or delayed needs to be accelerated and put back in place. Well-mapped-out plans are a basic necessity. Moreover, for accomplishments, the targets need to be measured more objectively'.

Despite some performance management tools and processes being practised by some public sector organisations as early as 2003, the government formally mandated a performance management system in 2019 to be implemented in all public sector organisations (PMO 2019). This move has made the prominent role of the performance management in the public sector even more apparent. It can be argued that through the introduction of the performance management system the government

<footnote n="2">² Based on interviews with the Management Services Department (2012) that was mandated as an ad hoc team to look after the National Strategic Alignment Programme.</footnote>
signalled its intention to produce a comprehensive performance-based culture for organisational success when a new individual-level performance management was introduced to compensate for the previous performance management format. In other words, performance targets and key performance indicators were imposed to connect the individual level with the existing organisational performance management to ensure greater alignment. At this time, the concept of performance measurement and key performance indicators were again emphasised through the sultan's speech during the Public Service Day celebration in 2017:

> the New Performance Management System [is] for all civil servants. The objective is to ensure that the assessment of work ... is carried out fairly and transparently, reflecting true contributions of every employee... the assessment system must focus on key performance indicators (KPIs), besides competency evaluation ... [that] will contribute more to productivity and competitiveness in providing quality public services as well as promote innovation as a work culture ... which will greatly benefit the economy. (PMO 2017b)

In 2014 Majlis Tertinggi Wawasan Brunei 2035 (Supreme Council of Wawasan Brunei 2035) was formed to provide policy direction and ensure the implementation of policies of strategic vision are consistent, coherent and sustainable. The council is performance management at the national level. In the same year, Peneraju Gagasan Gemilang untuk Rakyat (PENGGERAK, Piloting Exclusive National Goals, Gearing Excellent Results and KPIs) steering committee was also established to assist the Supreme Council in coordinating related strategies and policies of the national development plan agenda at the highest level. The committee is in charge of producing a framework of key performance indicators that would monitor Brunei's performance towards achieving Wawasan Brunei 2035 (Abu Bakar 2016; Government of Brunei 2024). At this point, performance management's crucial role became even more obvious. It was needed to move the public sector towards a dynamic, results-based form of governance that could strengthen its institutional capacity to carry out its national objectives as outlined in Wawasan Brunei 2035. However, the PENGGERAK steering committee was dissolved in 2018 and the Supreme Council absorbed its role. The main achievement of PENGGERAK before its dissolution was that Brunei's ranking in the World Bank's Ease of Doing Business index improved from 105 in 2014 to 72 in 2017 and Brunei was named the most improved country in the 2017 Ease of Doing Business report (Pang 2017).

## 14.3 Key Policies Supporting the Implementation of Performance Management

The previous section showed how the public sector was moving in the direction of new public management with an emphasis on performance management, which was initially adopted in 2003 and revised several times in 2007 and 2017. Because of the performance management-related speeches from the sultan, public sector organisations decided to implement performance management as it was deemed to have a high
degree of rationality. However, to understand the reality of performance management implementation, the policies and systems that shape and influence its implementation must be considered. For example, performance management should be aligned with critical management policies such as budgeting and human resources; otherwise, the extent to which organisations implement it effectively and meaningfully is debatable. As previous studies report, when governments have adopted performance management to become more results oriented, the performance management system and budgeting would be linked (Curristine 2008; Samaratunge et al. 2008). Curristine (2008) defines performance budgeting as relating allocated funds to results measured in the form of outputs and outcomes. This is to ensure efficiency in managing public resources. However, this would require shifting the emphasis of budgeting and accountability from controlling inputs to achieving results by linking the budgeting allocation to productivity through performance indicators. While the public sectors in other countries have introduced budgetary reforms following the adoption of performance management, the budgetary system and public auditing in Brunei are still in line with traditional financial controls and compliance with rules and regulations governed by legal requirements that are quite dated, such as the Audit Act 1960 and the Financial Regulations 1983 (Athmay 2008; Koike 2013).

The budget process still follows a traditional incremental approach with changes decided mainly on the basis of items in the previous budget. It is passed through negotiations and adjustments between the Budget Section at the Ministry of Finance and Economy and each of the relevant ministries. Any balance remaining after the lapse of the financial year cannot be carried forward to the next year (Hajah Sainah 2005). In terms of the financial audit, the main task is to make sure that financial activity conforms to the regulations concerning the budget allocated and to report non-compliance with financial regulations or any mismanagement of funds, without considering whether the objectives of government programmes or projects have been achieved (Yapa 1999; Athmay 2008). Although the Audit Act, Section 67(2) authorises the Audit Department to inquire whether ministries and departments have achieved efficiency and effectiveness in the use of public resources, this is still not the primary purpose of an audit nor mandatory for them to do since they do not control performance measures. Moreover, financial accountability does not lie with the public or the legislature but with the prime minister (Yapa 1999, 2014; Athmay 2008). This is because most government revenue is not derived from taxation and the budget is approved by the Legislative Council. As a result, the issue of a lack of external transparency has become common, something highlighted by the World Trade Organisation concerning trade policies:

> Brunei's institutional framework is characterised by a lack [of] [external] transparency ... [which can be] to the detriment of government accountability. In particular, there is no independent body to evaluate government policy, and, as a consequence, [it can] provide an impetus for reform of policies that are found to be ineffective. (cited in Yapa 2014: 11–12)

Although moving towards being performance oriented may theoretically stimulate demand for performance budgeting and auditing to ensure strategic plans and budgeting are linked towards output/results and set key performance indicators to
achieve them, the processes related to performance management in public sector organisations were not necessarily linked to budgeting.

Aside from the budgeting process, the human resources process regarding rewarding employees can be seen as separate from the performance management in the public sector. The performance appraisal used by the government was introduced in 1989 and underlined the principles of promotion and financial incentives. The appraisal was conducted in September each year. As time passed, the reliability of the performance appraisal has been questioned. Many perceived and accepted it as an annual ritual, in which inadequate or unclear job descriptions made appraisal difficult (Brunei Resources 2005). In 1992 the government introduced an annual bonus system to complement the performance appraisal system (PMO 1992). The yearly bonus was given out after a performance appraisal on which at least a 'satisfactory' assessment was obtained. However, this was not seen as an incentive to perform as managers and employees received the same bonus (one month's salary) irrespective of their performance grades (between A and D). Thus performance appraisal has been mainly used to decide bonuses, approvals for studies (and training abroad) and promotion. In 2000 an attempt was made to implement a performance-based bonus system where employees would get their bonus based on their grades of performance appraisal and the annual bonus system was restructured (PMO 2000). The differences between the annual bonus system concerning appraisal grades in 1992 and 2000 are shown in Table 14.3. It should be pointed out that government organisations are non-profitmaking; practising pay-for-performance to reward employees, as in the private sector, can be a challenge. The 2000 annual bonus system was not received well. Consequently, it was revoked, and the government readopted the 1992 bonus system, which is still in use today despite the introduction of the 2017 performance management reforms. In sum, a noticeable lack of a performance-based reward policy advocated by performance management practice can affect the intention of inculcating a performance-based culture in public sector organisations.

One of the more significant processes of performance management is the translation of organisational/departmental/unit goals into individual key performance indicators in order to link organisational and individual performance (OECD 2002). However, with the 2003 National Strategic Alignment Programme, such a link appeared to be missing in the performance management process and most strategic

<table><caption>**Table 14.3** Brunei Darussalam: Difference between the bonus rate in 1992 (still in use) and 2000 (revoked)</caption><thead><tr><td>Category</td><td>Evaluation</td><td>Circular No. 7/1992</td><td>Circular No. 12/2000</td></tr></thead><tbody><tr><td>A</td><td>Excellent</td><td>100</td><td>100</td></tr><tr><td>B</td><td>Very good</td><td>100</td><td>85</td></tr><tr><td>C</td><td>Good</td><td>100</td><td>75</td></tr><tr><td>D</td><td>Satisfactory</td><td>100</td><td>50</td></tr><tr><td>E</td><td>Needs improvement</td><td>50</td><td>25</td></tr><tr><td>F</td><td>Unsatisfactory</td><td>0</td><td>0</td></tr></tbody></table>
planning and alignment (Brunei Resources 2005). According to the OECD (2002), a performance appraisal should be closely linked with performance management to assess to which extent the individual could achieve the agreed targets and why specific goals could not be achieved. The missing link between performance appraisal and key performance indicators affected managers' and employees' motivation to implement performance management activities. Azaharaini Hj Mohd Jamil (2007) also argues that the performance appraisal did not emphasise individual personal and professional development, as anticipated in performance management practice. Even with the introduction of Wawasan Brunei 2035 in 2007, the lack of integration between performance management and performance appraisal processes still prevailed and, as a result, the ministries' performance management process focused primarily on the organisational and departmental (or divisional) levels. In 2017, when the performance management system was introduced, there was an attempt to link performance appraisal to individual performance management via key performance indicators. In other words, the outcomes of individual key performance indicators are reflected in the performance appraisal. Instead of being appraised annually, managers and employees are to be monitored and reviewed three times a year.

Two critical processes—budgetary and human resources—have yet to be reformed to support the full implementation of performance management. Theoretically, public sector organisations' strategic planning must cohere with the national vision, national development plans and budget. Without this integration, conflicting organisational priorities and objectives can result. The integration was also supposed to enable the status quo to be challenged in favour of a structural, cultural and behavioural shift to establish a more transparent, accountable and effective public sector in achieving its national goals. Despite shortcomings, public sector organisations have taken the initiative and begun formulating their strategic planning and implementing their performance management system.

## 14.4 Exploring the Nature of Performance Management Implementation in Public Sector Organisations

Although several new reforms were introduced in the public sector, at this point of writing the key empirical findings presented here are only based on the data collected between March and August 2012.<fnref n="3" /> The data revealed the development of performance management practices in the Brunei public sector, the influencing factors to its implementation, and how a practice developed in a Western context unravelled in a different context. Thus, to generate an in-depth understanding of performance management in the Brunei public sector, a case study approach was adopted, and five

<footnote n="3">³ While the 2017 performance management reforms are not included in the data analysis, the findings are still highly relevant to learning about the development of performance management in the public sector and how it was implemented. This offers an opportunity to understand the complexity within a certain period and suggest an improvement for current or future practice.</footnote>
governmental organisations were selected at the time based on the following criteria: (1) a performance management system had been introduced and was available to be studied in the organisation, and (2) the period of initial performance management implementation was different for each case to provide the opportunity to compare and understand the events that took place in the process. This is an approach that enables researchers to generate an in-depth, multifaceted understanding of an issue, in this case performance management, in its real-life context. The selected case organisations are shown in Table 14.4. Once the research access was obtained from the respective organisations, interviews with 80 organisational members from different organisational levels (top, middle and lower-level management) of all five organisations were carried out to gather primary information. Document review was used as a complementary data collection method before the analysis was drawn. Thus several internal documents such as organisational strategic plans, reports, consultancy and conference papers, minutes of meetings and other related documents were also reviewed. Informal conversations and observations were also made during the research visits to the case organisations.

The findings show that although there was strategic compliance within the organi-
sations to implement performance management, given the institutional pressures and
directives from the government, its performance management-related activities and
processes were primarily decoupled from the existing organisational practices. The
concept of decoupling is used to describe a different but interdependent relationship
between ceremonial and operational practices. The previous section highlighted some
elements of prevailing processes, such as budgetary and human resources, which can
be seen later to have contributed to the decoupling of performance management. This
raised questions about the objective of performance management in the public sector.
In hindsight, this study suggests that the purposes of performance management in
the public sector were not necessarily related to saving and improving efficiency,
as budgeting was not one of the main instruments of performance management.
The budgetary process was not integrated accordingly. Therefore, the contribution
of performance management to this objective has been limited. It was still apparent
in some organisations that even though performance management was not used to
determine budget allocation, performance management can be seen as instrumental in
diagnosing the issues related to organisational improvement. In other words, external
transparency may not be one of the objectives of implementing performance manage-
ment, as reporting of their performance to the national strategic alignment committee
was limited. However, as a diagnostic tool, performance management helped increase
internal transparency and accountability.

When the National Strategic Alignment Programme started in 2003, there were
no standard guidelines or a dedicated agency to assist in developing strategic plans
and implementing performance management processes, setting the proper key perfor-
mance indicators, and aligning goals and targets to the national developments (Brunei
Resources 2005). An ad hoc department was assigned to administer the programme
and collect performance reports for the symposium. However, they had limited
capacity to handle the programme. Moreover, this was not part of the ad hoc members'
core business and so they were not specially trained for scrutinising performance
<table><caption>**Table 14.4** Comparison between the case study organisations of the implementation of performance management</caption><thead><tr><th></th><th>Ministry A</th><th>Ministry B</th><th>Ministry C</th><th>Department D</th><th>Department E</th></tr></thead><tbody><tr><td>When the strategic plan was introduced</td><td>2004 (first)<br>2007 (second)<br>2011 (third)</td><td>2000 (unofficial)<br>2009 (first official plan)</td><td>2008</td><td>2010</td><td>2008</td></tr><tr><td>Performance management framework</td><td>Balanced scorecard and key performance indicators</td><td>Balanced scorecard and key performance indicators</td><td>Key performance indicators</td><td>Balanced scorecard and key performance indicators</td><td>Balanced scorecard and key performance indicators</td></tr><tr><td>Team that looked after performance management process</td><td>Office of strategic management (OSM)*</td><td>Ad hoc OSM under strategic planning unit</td><td>OSM (previously a division)</td><td>Ad hoc administrative service transformation initiatives unit</td><td>Strategic management unit</td></tr><tr><td>The position of OSM/ strategic team in the organisation</td><td>Dedicated department</td><td>Ad hoc unit under a division</td><td>Department with multiple responsibilities</td><td>Ad hoc division with multiple responsibilities</td><td>Dedicated unit under a division</td></tr><tr><td>Performance management reporting system</td><td>In-house system (Excel)<br>After 2010: performance management information system</td><td>Email or paper document</td><td>Email or paper document</td><td>Email or paper document</td><td>Email or paper document</td></tr><tr><td>Strategic committee</td><td>Strategic management group</td><td>Strategic planning group</td><td>Management group</td><td>Management group</td><td>Management group</td></tr><tr><td>Chair of strategic committee</td><td>Deputy minister of the ministry</td><td>Deputy permanent secretary of the ministry</td><td>Deputy permanent secretary of the ministry</td><td>Director of the department</td><td>Director of the department</td></tr></tbody></table>

*Note* Ministry A, B, C, D and E refer to specific ministries, but for confidentiality they are not named.

* The office of strategic management (OSM) is deemed very important for the performance management process as it is the institution within the organisation to support implementation. The OSM prepares and designs, oversees and monitors all strategy-related activities and ensures all departments and units support and align their activities with the corporate strategy. The OSM also collects performance information and conducts performance reviews for decision-making and creates meeting agendas with the strategic committee (Razak and Hidayat 2016).
reports in the performance management way. As a result of there being no lead agency of performance management in the whole government, the individual organisations took the initiative to prepare their strategic plans and developed performance management reporting. This led to divergences in performance management practice between the organisations in terms of when performance management was formally introduced, the framework created for performance management, teams that looked after the process and the position of the team/office (Table 14.4). The performance management tools and framework adopted were coherent in all organisations—the balanced scorecards and key performance indicators. Perhaps this resulted from the constant government reminders to use such tools in their performance management process. It was also consistent in all organisations that their performance management processes were established only down to departmental and divisional levels without a link to the individual level, which meant individual key performance indicators were unavailable.

The findings strongly suggest that the variation in performance management practice stemmed from the differing ranks of the organisations' strategic committee chairs who held the authority to influence implementation. The role of leadership and top management is crucial for implementing performance management because their commitment and prioritisation influence the way organisational members act and feel about performance management and the way strategies and performance measures are established, determined and adopted. Kaplan and Norton (1992), who are well-known pioneers of balanced scorecards, suggest that having an office of strategic management is essential to managing performance management processes and that this office will be most effective when it has direct access to a chief executive officer (CEO) of the organisation because the execution of strategy requires ongoing changes that only the CEO has the power to authorise. However, as seen in Table 14.4, there were variations in how the office of strategic management was established (whether ad hoc or dedicated) and positioned within the hierarchical layers of management—how close it was to the CEO of the organisations for decision-making—and established the reporting system—whether using information technology or a paper-based system. Ministry A was seen as the most active in implementing performance management among the case studies. The ministry took the lead in timing as its first strategic plan was published in 2004, while the others started after Wawasan Brunei 2035 was introduced in 2007. The ministry also seemed to closely follow Kaplan and Norton's suggestion by putting the office of strategic management close to its second-highest hierarchical authority, the deputy minister, and making the critical organisational members involved in the process report directly to him. To improve the implementation of performance management, the ministry also hired consultants to assist with its related strategic activities and selected only those who had graduated in strategic management or had an equivalent background to office of strategic management directors. An information system was created to help the ministry collect, monitor and report performance information to ensure timely information for performance evaluations.

Because the chair of the strategic committee at each organisation was at a different management level, the findings show that such an arrangement appears to have
influenced the extent of the organisational members' willingness to comply with performance management implementation. It was because the chair at various hier- archy levels had different understandings of how performance management should be implemented and gave different degrees of importance and priority to the implemen- tation process in their organisations. For example, each organisation positioned its office of strategic management differently from its existing organisational structure (Table 14.5). The table shows that the offices of strategic management in Ministry B and Department E were somewhat bound by bureaucratic reporting to the chair of the strategic committee, which can slow down performance management processes. Also, the offices of strategic management in Ministry B and Department D were ad hoc units, meaning performance management processes were carried out more on a makeshift basis rather than as part of the unit's core activities.

Nevertheless, rather than expecting some differences in the effects of performance management across the case organisations because of their variations in the imple- mentation, the findings show that there was significant similarity in the practice of performance management across the cases as they were subjected to similar institu- tional constraints such as limited integration between strategic planning, budgetary and human resource processes. This had implications for how performance manage- ment was legitimised by the chair of the strategic committee of all organisations and their members, as the influence of existing processes was stronger than imple- menting performance management. For example, since there was no connection between strategic planning and budgeting, performance information was not a source of decision-making. Performance management was perceived more as an optional than a core practice; it became a matter of 'habitual reporting' (Fairul Rizal and Thuraya Farhana 2018). It was apparent in the accounts of most senior officers that there was some frustration that information from the performance management process could not be used to support and justify the additional financial resources needed for the organisations' projects according to their priorities. Even if there was

<table><caption>**Table 14.5** Position of office/unit of strategic management</caption><thead><tr><th></th><th>Ministry A</th><th>Ministry B</th><th>Ministry C</th><th>Department D</th><th>Department E</th></tr></thead><tbody><tr><td>The position of OSM/ strategic team in the organisation</td><td>Dedicated department</td><td>Ad hoc unit under a division*</td><td>Department with multiple responsibilities</td><td>Ad hoc division with various responsibilities</td><td>Dedicated unit under a division</td></tr><tr><td>Based on the position of OSM, the members report to:</td><td>Director with direct access to the deputy minister</td><td>Unit head who is three levels below the permanent secretary</td><td>Director with direct access to the deputy permanent secretary</td><td>Director</td><td>Unit head who is two levels below the director</td></tr></tbody></table>

*Note* In this context, a department is further divided into divisions, and so a division is smaller than a department; the head of a division reports to a head of a department
an attempt to use the performance reports to determine budget reallocation, the budget was still a constraint. As a result, according to most interviews, this had implications for performance measurement setting and the reporting and use of performance information. In all cases, it was apparent that most of the key performance indicators were process indicators rather than performance indicators, risking inducing ‘tunnel vision’ or merely ‘box ticking’ to fulfil the government’s requirement in implementing performance management. There were instances when key performance indicators were not regarded as necessary because, when some key performance indicator targets were not met due to budgetary explanations, the reasons seemed to be routinely accepted without a penalty being imposed. For example, because of budget/resources constraints, some targets that required resources resulted in delayed projects and targets became unachievable. These constraints were considered acceptable to justify all actions or inactions because strategic planning and budgets were not linked.

At the same time, the insufficient link between performance management and performance appraisal could result in an unintended consequence, such as a lack of commitment and motivation from the organisational members to implement performance management (cf. Fryer et al. 2009; Northcott and Taulapapa 2012; Jurnali and Siti Nabiha 2015; Sutheewasinnon et al. 2016). The performance management processes, such as developing targets, collecting and analysing data, and presenting performance information and/or reports, were perceived by most interviewees to have increased their workload and led to a digression from their primary tasks. This resulted in less commitment and more compliance, where ownership had little meaning. Instead of seeing the benefits of the performance management process, it appeared to have increased a kind of ‘formalisation’ that was burdensome and created dissatisfaction among the interviewees. It was the norm to give reasons, such as ‘busy’ or ‘other important work’, for not meeting targets or submitting their reports on time. The role of performance management as an accountability system was not materialised. It was thus customary for performance management activities, such as reporting and monitoring performance, to get sidelined and eventually dismissed, as the process was considered optional. This is inconsistent with the literature that suggests that performance management can enable or direct employees to prioritise organisational objectives. When performance management was decoupled from performance appraisal, most interviewees did not feel they needed to support or trust the system. They felt psychologically disconnected from the process without a proper reward, resulting in low priority performance management. In other words, the organisational members perceived performance management as irrelevant to their role; hence they lacked real commitment. In turn, this had become a challenge for offices of strategic management in respective organisations to get performance information and reports on time for the strategic review meeting. Nonetheless, despite lacking linkages between performance management, budgeting and appraisal, performance management was still seen as beneficial for the organisations to provide ‘checks and balances’, which suggests that when in use it had a diagnostic purpose of identifying areas that required attention and that improved the internal transparency of organisational activities.
However, shortcomings were not necessarily the result of a lack of commitment in some cases but rather a lack of competence. While some organisational members understood and knew how to execute performance management processes, the findings show that a low level of understanding of these processes was also prevalent. Even interviewers at the senior level had negative accounts of performance management-related training, which led to a poor level of readiness in terms of cascading down information, setting targets and analysing performance data or information for reporting. Those organisations with inadequate information technology to support the process had to do performance evaluation and reporting manually. In some cases, adopting 'tunnel vision' was inevitable and was not done on purpose but was due to a lack of skills and understanding of how targets were to be measured and reports produced. However, the lack of priority given to training might have come from the low perceived usefulness of performance management as an instrumental tool.

What also needs to be taken into account is the challenging nature of quantifying the outcome of the activities in the public sector (Modell 2008; Fryer et al. 2009). In other words, setting outcome-based targets in the public sector was considered problematic. That could be a reason why the targets being process indicators were apparent in all case organisations. As a result, the evaluation of performance information tended to focus more on the process than results, but this may lead to ossification. When an indicator is no longer relevant, it is not revised or is removed to give a superficial appearance of its existence (Thiel and Leeuw 2002; Norhayati and Siti Nabiha 2009; Rautiainen and Järvenpää 2012). Most organisations had hired consultants to help put a performance management system/framework in place, but the performance management process still appeared to be carried out intermittently. As Mohd Rozan bin Dato Paduka Haji Mohd Yunos and Ivana Milojević (2016) argue, many plans done by external consultants were usually commissioned for a limited period, thus affecting the continuity in implementation, especially when there was limited capacity to take over. This had implications for strategic management reviews or meetings when performance report submissions tended to be low.

From this discussion, it can be argued that, due to the missing link between existing human resources and budgeting processes and performance management, the latter was perceived as a secondary priority. Not all organisations were enthusiastic about performance management. The leadership's role therefore became of utmost importance for the implementation as a formal obligation to the government. Although the idea of performance management was supposed to be underpinned by performance-driven goals, in practice it was perceived as justified by the principle of hierarchical authority. In other words, the commitment from the organisational members towards implementing performance management was generated and maintained by the obedience culture that existed, which was highly dependent on hierarchical authority. This could be because Brunei is a 'high power distance' country (Blunt 1988; Chan and Pearson 2002; Mahani and Low 2013).<fnref n="4" /> With a lack of incentives to implement

<footnote n="4">⁴ The power distance culture believes that organisational power should be distributed unequally. In the workplace where high power distance is prevalent, power is emphasised in cultures which are</footnote>
performance management, an obedience culture was seen as beneficial and encour-
aged to generate and ensure compliance, even though this undermined the idea of
being driven by performance.

The downside of such practice was that the pace of performance management
implementation would depend on the leadership and whether it was being used
in a strategic manner. Because the implementation of performance management
depended on hierarchical instruction, its monitoring and reporting depended on the
frequency of strategic review meetings, which resulted in on and off implementation
in most organisations and a separation from the day-to-day operational and decision-
making process. In other words, most organisational members only complied with the
performance management process when instructions from the chair of the strategic
committee or the offices of strategic management reminded them of the next perfor-
mance management cycle. It also undermined the objective of having performance
management because it discouraged proper dialogue and instead encouraged acqui-
escence to authority and rules. When there were concerns related to the performance
management process, targets or reports, they were not formally voiced out since it was
not the norm for employees to overtly criticise, even though this might be construc-
tive. This may point to a collective culture of non-confrontation as confrontation
appeared not to be socially acceptable in this context because interviewees seemed
to ‘keep their opinions to themselves’ to show respect for seniority (Blunt 1988;
Chan and Pearson 2002; Korac et al. 2020). This notion affected the dynamics of
strategic management group meetings where strategic dialogue could be limited.
However, if the commitment to implement the performance management process is
needed, the findings show that the frequency of meetings can play a crucial role in
securing it from the members. Otherwise, there might be no solid urge to implement
performance management, especially when the accountability system and perfor-
mance evaluation were not adequately integrated with their existing organisational
activities. However, if the commitment to performance management activities was
only prompted by instruction of the hierarchy, they would become an imposition
of extra work, which affected the buy-in of organisational members towards the
implementation. The advantage of evaluation and monitoring lies in its regularity
and the timely availability of monitoring and reporting results in the performance
management process. Nevertheless, when organisational members faced competing
demands for their time and effort between their core and performance management
activities, and when there were no legal punitive actions applied for doing perfor-
mance management work sporadically, this led to performance management being
decoupled from their activities.

oriented to hierarchy. This hierarchical culture is common in Brunei. The authority of a leader is often not questioned, especially by their subordinates, for to do so or even to show any signs of disagreement would be considered rude and improper on their part (Blunt 1988; Mahani and Low 2013).
## 14.5 Conclusion and Recommendations

Performance management started in the Brunei public sector in the 2000s, but its use has been limited. On reflection, performance management may be seen as having been implemented ceremonially. Although it has yet to turn entirely into a results-oriented form of management in most organisations, it was still a useful diagnostic tool. However, among all the objectives promised by the literature its main achievements were limited to internal transparency and the presentation of performance (OECD 1997). This suggests a number of key conclusions.

First, this highlights performance management's important role for integration, performance-based budgeting and performance appraisal, while the case organisations' efforts to implement performance management ultimately resulted in a loosely coupled system. The findings demonstrate the process and challenges of implementing performance management in linking targets, setting targets and performance evaluation that resulted from the lack of deep integration. The study thus provides evidence to help the Brunei public sector develop a new perspective for performance management in the government by reflecting the need to integrate performance appraisal and performance-based budgeting. There is an urgent requirement to have a lead national agency in the government, as other countries do (such as Singapore and Thailand), to help with the strategic coordination of performance management implementation.

Second, the implementation of performance management was constrained by insufficient human resources, especially for the offices of strategic management with ad hoc membership. It also suffered from the burden of a large workload, which constituted one obstacle to having continuous performance management. Further, implementation was also restricted by a lack of technical capacity. Performance management was underutilised because obtaining a supply of performance information was challenging and so implementation was carried out sporadically. For performance management to be impactful and to encourage conducive behavioural change will require greater intensification in terms of regular monitoring of actual information and having more robust analytical capacities of the organisational members because they have a prominent role in preparing sound findings for review. This is in order to fulfil the calls in the sultan's speeches that repeatedly signalled the need for efficiency and cost savings in government.

Third, the findings show how organisational culture, which is incredibly hierarchical, had an impact on performance management implementation. At that point, performance management was viewed as merely an 'addition' by the organisational members. This was because actions and resources were limited, and organisational accountability and performance appraisal systems were not changed. In other words, performance targets and key performance indicators were not included in their appraisals or the organisational budget documents—they did not play a role in decision-making on resource allocations. Performance management was thus formulated and communicated on the basis of ad hoc instructions from the hierarchical
authority rather than driven by an alignment between the strategic plan and organisa-
tional and individual objectives. This study raises the possibility of the coexistence of
both change and stability. Suffice to say that performance management was decoupled
in practice, reinforcing the idea of performance management as merely ceremonial.

Nevertheless, this study has provided evidence for the current public sector policy-
makers to analyse and consider past issues when developing a performance manage-
ment system for the government. It may not have to take a rigorous approach
and could instead pursue an incremental approach that would appear more suited
to improving performance management implementation. As noted earlier, in 2017
another mandate came from the government for implementing a new performance
management system in all public sector organisations (PMO 2017a). The new aspect
was that the performance appraisal system linked the organisational, departmental
and individual performance management through individual key performance indi-
cators (which were missing in the earlier approaches) and the use of the bell curve
method. The method was proposed to set the percentage limit for awarding pre-
service grades in all ministries and departments. Regardless of the changes made to
performance appraisal in 2017, there was still a noticeable lack of a performance-
based reward policy, as advocated by the new public management model. Further-
more, the 2017 performance management system was revised in 2019 and the use of
the bell curve was discarded. In view of this, the changes made in the new policies in
2017 and 2019 indicate that implementing a well-designed performance management
system to realise its full potential in the public sector still faces critical challenges.

Looking at the current design and its integrated programme is recommended to
improve all stages of the performance management cycle. Second, it is crucial to
reform supporting policies for performance management in the public sector. For
example, there is a need to link programme-based budgeting and its implementa-
tion based on performance information and government priorities. The same applies
to human resources management and its integration with performance management
to create ownership of performance management activities and, hopefully, change
to a more results-oriented organisational culture. Third, there is a need to develop
technical competence or expertise in carrying out performance management activi-
ties to address poor levels of readiness. Training should be provided and workshops
organised to address employees on the benefits of the performance management
system and to carry out the activities effectively, especially to collect and use perfor-
mance information. At the same time, it would be helpful to have dedicated external
support that can involve the main stakeholders more actively to develop a struc-
tured, consistent and continuous dialogue between relevant government organisa-
tions. Inter-ministerial coordination and partnership need to address and set targets
for government priorities that are highly important. It is also necessary to strengthen
the capacities of organisational members via training or coaching.

As for all research, this analysis has some limitations. The findings are based on a
cross-sectional study rather than a longitudinal one. A longitudinal perspective would
have enriched this research with more informative data regarding institutional change
across several periods, especially now that the Brunei public sector has a different
performance management system to the one being studied. Further studies investigating the integration of organisational- and individual-level performance management may help to understand what other factors influence its implementation and if any issues and challenges persist over time. Nevertheless, the experience shared in this chapter can benefit other public sector organisations, the late implementers, whose performance management is still an ongoing process. Finally, it would be interesting to find out to what extent the recent performance management has been institutionalised and whether new initiatives are being introduced to support performance management that brings about changes. Future research might shed a different light and show different outcomes. If not, contextual factors would have been the most influential in shaping reform.

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**Thuraya Farhana Said** is an Assistant Professor at the UBD School of Business and Economics, Universiti Brunei Darussalam. She attained a PhD in management from the University of Surrey, United Kingdom. Her research interests focus on strategic management, performance management, organisational development and entrepreneurship. Recent publications, as coauthor, include: *Organizational effectiveness: The role of culture and work engagement. Management Decision* (2024); *Knowledge exchanges for open innovation: The role of inter-organisational citizenship behaviours and organisational support. Knowledge Management Research and Practice* 22(1) (2024); An empirical investigation of organisational factors and organisational effectiveness: The mediating role of knowledge sharing. *International Journal of Public Administration* 47(8) (2023); and, National culture and entrepreneurial orientation in an emerging economy: The moderating role of informal enterprises’ survival intent. *Journal of Entrepreneurship in Emerging Economies* (2023). She has served as the Faculty’s International Network Chairperson and been a member of the university’s entrepreneurship development team since 2017.
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Chapter 15
# Operational Excellence through
Managing Values in the Brunei
Darussalam Public Sector

Mahani Hamdan

**Abstract** Operational excellence and continuous improvement are conceptually distinct but closely related. Operational excellence aims to achieve a long-term change in organisational culture while continuous improvement focuses on the process. Operational excellence (including lean manufacturing, Six Sigma and total quality management) has been applied extensively by private firms and companies in the industrial field and today these methodologies are also widely utilised in public organisations to achieve quality excellence in public services. Increases in global competition have put pressure on public services to be as productive and efficient as private services. This chapter aims to explain and uncover the conceptual definition of operational excellence in the context of Brunei Darussalam, analyse the methodologies used to frame it and discuss the challenges faced by public services in implementing it. The study presents data from two sources. The primary data derive from semi-structured interviews with 17 middle management officers from various government departments and agencies using a convenience sampling technique. Secondary data are based on a review of journal articles, reports and news. Results show that operational excellence in Brunei's public services is defined in terms of processes measured by quality management, productivity, efficiency and effectiveness, and can be achieved through total quality management, balanced scorecards, and programme and performance budgeting. Other elements include value congruence, leadership, human resource management practices, service strategy and cultural involvement which are also critical in pushing excellence within an organisation, together with innovation, technology and policies appropriate to the national stages of socioeconomic development.

**Keywords** Brunei Darussalam · Operational excellence · Public services · Quality management · Productivity · Value congruence · Human resource management

<footnote>Mahani Hamdan (✉)
UBD School of Business and Economics, Universiti Brunei Darussalam, Gadong, Brunei
Darussalam
e-mail: mahani.hamdan@ubd.edu.bn</footnote>
# 15.1 Introduction

Operational excellence is the pursuit and execution of a business or management strategy in an exemplary way. It focuses on delivering sufficiently good quality products and services against the lowest cost (Treacy and Wiersema 1995). Many studies use operational excellence to refer to continuous improvement and other widely used methods such as Six Sigma or lean production and total quality management.<fnref n="1" /> Continuous improvement is an organisation-wide process of focused and continuous incremental innovation (Bessant et al. 1994). Operational excellence and continuous improvement are conceptually distinct but closely related. Continuous improvement focuses on the process, while operational excellence aims to achieve a long-term change in organisational culture.

Operational excellence has been extensively applied by private firms and companies in the industrial field, such as Toyota using lean manufacturing, General Electric and Motorola using Six Sigma principles and methodologies, and Toyota and Ford using total quality management. Today these methodologies are also widely applied in public organisations to achieve quality excellence in public services. Although total quality management is recognised as an essential part of business operations in the private sector, it is not necessarily an aspect of activities in public services. Increases in global competition have put pressure on public services to be as productive and efficient as private services (Hsieh et al. 2002).

Research shows that total quality management can bring advantages to public services, yet its implementation in the public sector remains problematic (Lewis 1995; Maram 2008; Salman 2022). Several studies argue that total quality management cannot be well implemented in public services for a number of reasons: low commitment from top managers; public services focus on outputs rather than inputs and processes; fewer incentives to drive employees to become customer oriented; rigid rules and systems in bureaucracy; difficulty in defining service quality concept and to make the output uniform; and employee attitude and behaviour (Dewhurst et al. 1999; Hsieh et al. 2002). Avia Enggar Tyasti and Rezzy Eko Caraka (2017) examine the challenges of implementing total quality management in public services in four aspects: the system structure, customers, employee perception and culture. Although the implementation of total quality management as a means to achieve operational excellence in public services is more difficult than in the private sector, Tyasti and Caraka's arguments are mainly based on theories discussed in journal articles and books with limited practical insights and applications.

<footnote n="1">¹ Six Sigma is a business strategy that seeks to identify and eliminate causes of errors, defects or failures in business processes by focusing on outputs that are critical to customers (Snee 1999). Total quality management is a revolutionary concept in the management of quality that depends upon tangible investments in machines, processes or facilities and intangibles such as the integration and management of these resources, the corporate and cultural environment and personnel motivation. It is also viewed as a total (social, organisational and operational) commitment to manage a firm's resources to achieve the highest levels of performance in everything in which the firm is involved (Tapiero 1996).</footnote>
This chapter aims to uncover and explain the conceptual definition of opera-
tional excellence in the context of Brunei Darussalam and the methodologies used to
implement it. I then discuss the challenges faced by Brunei's public sector in imple-
menting operational excellence. Brunei's public sector is used as a case study for two
reasons. First, limited research has been conducted on assessing the public sector
and its services. Second, despite some improvements, the inefficient government
bureaucracy score was reported at 15.2 in 2016, as reflected in the country's Global
Competitiveness Index (with the lowest scores being better), compared to Singapore
(3.1), Malaysia (8.9), Indonesia (11.1) and Thailand (12.1) (World Economic Forum
2018). This situation warrants further investigation into the reasons behind the poor
public service delivery processes, which include long queues, delayed approval flow
and limited information sharing and transparency.

This study employs a qualitative approach and the data derive from two sources.
The primary data come from semi-structured interviews with 17 middle manage-
ment officers from various government departments and agencies using a conve-
nience sampling method. Secondary data are based on a review of journal articles,
reports and news. The perspective of middle management officers is selected for two
reasons. First, they are more easily accessible and therefore convenient sources of
data. In this respect, I was involved in the training activities of Executive Development
Programme for Middle Management Officers throughout the interview period (PSD
2014). Second, these departmental managers or officers are directly accountable to
top management for the functioning of their respective departments, devoting more
time to organisational and directional functions and operational activities. Sample
identities and the organisations they work for remain confidential as requested by the
respondents. The chapter is organised as follows. Section 15.2 presents analyses and
discussion on the conceptual definition of operational excellence in Brunei's public
sector. Section 15.3 examines the value congruence approach as a means to achieve
operational excellence and the challenges of implementing it. Recommendations are
presented in Sect. 15.4, while Sect. 15.5 is a summary of the major conclusions of
the study.

15.2 Operational Excellence in Brunei’s Public Services:
A Middle Management Perspective

In general, the middle management officers selected in this study had largely defined
the concept of operational excellence in Brunei's public services in terms of processes
measured by quality management, productivity, efficiency and effectiveness.
**15.2.1 Quality Management**

The middle management officers referenced quality management to two things: quality standards and quality management systems, as similarly identified in a study conducted by Jan Wynen et al. (2016) based on evidence from six European Union countries; and the use of technology for high-quality service delivery. The international standard on quality management, the ISO 9000 certification process, began to take place in Brunei's public sector only in the early 1990s, initiated by the Ministry of Development. This practice was followed by other government departments with the implementation of ISO 9001 over time: Directorate of Development and Work Services (2009), the Meteorological Department (2014), Telekom Brunei (TelBru) (2017), Politeknik Brunei (2017), the Management Services Department at the Prime Minister's Office (2019), Universiti Teknologi Brunei (2019) and Universiti Brunei Darussalam (2019). Several respondents said that their respective departments had also continued to invest in digital technologies to improve their internal processes. Indisputably, technological development has not only changed the world of work but given rise to new expectations of public services on the part of citizens.

**15.2.2 Productivity**

Germà Bel and Mildred E. Warner (2015) describe public sector productivity as the relationship between what is produced, in terms of goods and services—outputs— and the resources used in the processes of achieving them—inputs. Technically, it is the ratio of output to input. They highlight the role of inter-organisational collaboration in reducing the cost of delivering public services to citizens. Many respondents in this study, however, viewed productivity as a broad social and economic concept. The social concept aspect relates to an attitude of mind, based on the belief that one can do things better today than yesterday and better tomorrow than today. This aligns with one of the strategic goals in Wawasan Brunei 2025 (Brunei Vision 2035), that is ‘ensuring the highest quality of life’ (Brunei Darussalam 2024). The government elucidates quality of life through ‘the capability lens, as having a population that is well-educated, highly skilled and healthy, among other elements; lives harmoniously and peacefully; and engages effectively in economic and social activities’ (Gweshengwe et al. 2020: 1). It is essential to invest in quality of life to increase productivity and accomplish national objectives. The economic concept of productivity is about creating value through expansion in labour and capital or producing the same or more output with less labour and capital. In this regard, the essence of economic development is not merely associated with industrialisation but also technology catch-up and innovation (Baumol 2002; Ohno 2020). A few respondents were sceptical about the outlook for Brunei’s civil service but many also remained positive about creating a culture where civil servants feel empowered and confident enough to raise concerns and issues pertinent to existing policies or processes within
the department where appropriate, and to give recommendations towards achieving operational excellence. Similar to Siti Nabiha Abdul Khalid and Robert W. Scapens (2005), the current study indicates that there was some resistance to this change to new key performance indicators for managing performance. Respondents suggested the government should review promotion incentives for civil servants and improved service delivery. They posited that clear promotion incentives would improve public sector efficiency and thus must be integrated in the government's public service modernisation agenda. Razali Mat Zin (2013), who studied the budgetary process of the Brunei public sector, shares a similar view and further highlights that productivity improvement and national planning really depend on the incentives the government creates for public organisations.

Continuous improvement, as an integral part of operational excellence, has also been conducted to review work processes in public sector organisations, but with little progress (Asif et al. 2010). Some respondents stated that their organisations once applied lean management in 2016, but that it was for certain operations or tasks and only happened for a short period. Lean management is a technique that was implemented by Toyota in 1990 with the aim of minimising the process waste, maximising the value of the product or service to the customer without compromising the quality, generating growth in total output attributable to effective allocation of resources and factors of production, and reducing flow times within processing systems in which goods are produced and services are performed just as they are needed, that is just in time innovations (Womack and Jones 2003). For continuous improvement culture to take off, respondents viewed that it takes leadership vision and influence. It also requires evaluation, teamwork and management discipline at scale. They observed that some leaders did not manage to achieve the ongoing, incremental impact they wanted mainly because they had not fundamentally changed how they lead and manage, lacked clear targets and faced difficulties fostering collaboration between multiple stakeholders. Respondents said that continuous improvement is or should be an ongoing journey and operational excellence a strategy. Leaders who can think and act strategically can accelerate operational excellence. They further said that bureaucracy that was once considered the best form of administration, coordination and control is no longer appropriate in today's environment as it had stifled their creativity and innovation at work. Another aspect raised by the respondents was role conflict. The fact that the government plays many roles is not a question the civil service can take lightly.

### 15.2.3 Efficiency and Effectiveness

Efficiency and effectiveness are management concepts. Efficiency means doing things right and effectiveness is doing the right things (Drucker 1974). In the context of public administration, Harry P. Hatry (1978: 28) defines efficiency as the 'extent to which government produces a given output with least possible use of resources' and effectiveness as 'the amount of end product, the real service to the public, that
the government is providing'. Out of 17 respondents in this study, only two described efficiency in technical terms as a measure of the ratio of output to input. Eight respondents added value and accountability dimensions (quality of governance) as a way to measure efficiency, while others pointed out that efficiency and effectiveness are interchangeable terms in relation of inputs, outputs and outcomes (see Mandl et al. 2008). Today, implementing Brunei's e-governance using technology has brought unprecedented changes to improve the efficiency and effectiveness in public services. These initiatives include the Treasury Accounting and Financial Information System (2002), Bru-HIMS (2012), Tabung Amanah Pekerja e-Amanah (2014), Land Application and Registration Information System (2016) and Sistem Sumber Manusia (Human Resource System) (2021). Though all these have been introduced to facilitate solutions, new technologies also bring about new challenges in public services. To meet the needs of the country's digital society and economy, the government allocated a budget of BND91.4 million in 2019–2020 for information and communications technology infrastructure to create value for Brunei's economy and ensure social development for its citizens (Ain Bandial et al. 2019).

### 15.2.4 Methods Used for Achieving Operational Excellence

Operational excellence in Brunei's public services encapsulates major themes such as total quality management for improving quality and efficiency, balanced scorecards for enhancing performance and results, and programme and performance budgeting for improving cost effectiveness and accountability. Overall, respondents defined total quality management by identifying three aspects—creating value for public service users, citizens and society through public service delivery; innovative approaches to service delivery; and citizens' perception and assessment of services offered. The balanced scorecard was described as a framework for organisational performance measurement consisting financial, customer, internal process, and learning and growth perspectives (Kaplan and Norton 1996). It is a tool for achieving strategic alignment and strategic balance among citizens, public sector employees, the government and other stakeholders. Nonetheless, when defining programme and performance budgeting, none of the respondents gave a clear description of it. While acknowledging that it is a budgeting technique, how it works remained a puzzle. Indeed, programme and performance budgeting provides a proper allocation system of scarce resources efficiently and effectively through planning and implementing programmes and activities, measuring performance and establishing proper monitoring mechanism in a way that would guarantee the control of government expenditure (Moynihan 2006).

These methods or tools have already been integrated in Brunei's civil service reforms for decades now and there has been a national quality movement to support and promote total quality management and other tools for achieving operational excellence in public services, including the establishment of quality awards. Public complaints as a quality improvement tool must also be properly managed. It is a
key component of good customer focus, meaning the interests of society at large. Rosdi Bin Haji Abdul Aziz (2016) argues that the mechanisms for realising customer value were not in place in public services and that in practice only a few government departments managed complaints in any systematic manner. These methods or tools in new public management theory have also inspired many reforms in the public sector encouraging the government to be more ‘business-like’. They started in Britain in the 1980s and have also been pursued in Australia and New Zealand (Mascarenhas 1993). The reforms involve drastic changes in public services and calls for competition with the private sector. Respondents in this study agreed that there is a need for public service transformation in Brunei and further indicated that their respective organisations had partially applied or at least attempted to use the various methods. Regrettably, the progress and evaluation of the use of these methods were never recorded or documented.

Results from the interviews highlight three key real scenarios. First, there was the need to deliver an effective training management system. The majority of employees had received some training on tools, approaches and techniques for use in public management (a few if not all) but limited implementation guidance in the execution plans. A political buy-in from key stakeholders was viewed as essential for addressing technical and institutional challenges. Second, as much as public sector employees valued stability in leadership, changes in leadership can lead to instability in public management and administration. At least some of a leader’s plans to implement new governance tools, approaches and techniques could have been completed at the time of leadership changes. While a new leader will have different plans which they also want to be executed and applied, the plans of the previous leader and commitment to continue them ended in the middle of their execution. Third, the government’s implementation plans sound persuasive. But is this enough? How to fund change and who will apply and be affected are not adequately addressed. Hence, public sector leaders are increasingly expected to have a sense of purpose, clear direction in their plans and focus on the big picture.

A few respondents shared an interesting view that the management methods or instruments deployed towards achieving operational excellence were difficult to implement in their organisations due to strongly institutionalised culture. Organisational age as a proxy of organisational culture and institutional norms in Wynen et al. (2016) seems to suggest that older departments or agencies have more enshrined culture, values and norms, which makes it harder to introduce and use novel management methods or instruments effectively (see also Lægreid et al. 2006). Unless there is strong leadership and top management support, organisations can achieve operational excellence through standardisation of processes and automation, but fundamentally it is the people who contribute to operational excellence. Among the challenges facing Brunei’s civil service in the twenty-first century are inefficient services, globalisation, a government-driven economy, financial crises and the ongoing process of nation-building. Regardless of the level of sophistication and the methods used in public services such as ISO, total quality management, balanced scorecards, and programme and performance budgeting, inefficient services cannot be simply resolved without having employees with the right skills and attitude. Employees’
attitude and behaviour are shaped by their personal values and beliefs, and these
values and beliefs which manifest in behaviours are rooted in the tenets of new
public management and reinforced more recently by austerity pressures. Thus one
of the key drivers of operational excellence, among other things, is the presence
of shared values—value congruence—between individual and organisational values
because employees who feel that their own values match those of their organisations
will be more likely to have a strong desire for success and high motivation to strive
for excellence.

15.3 Value Congruence for Building Operational Excellence

Both organisational and employees’ personal values, as well as the congruence
between these two values (person-organisation value fit) are critical but challenging
steps towards operational excellence. In the context of this study, the person-organi-
sation value fit is defined as the compatibility of work core values between employees
and an organisation, from the perspective of supplementary fit to predict individual
and organisational outcomes (Muchinsky and Monahan 1987; Kristof 1996; Edwards
and Cable 2009). Strong, clearly articulated values and person-organisation value
fit are imperative for building not only a culture of continuous improvement but also
a positive culture in an organisation. In the work context, personal values are the
set of beliefs and principles that guide and influence employees’ behaviours, actions
and decisions. They can also be referred to as core values that employees apply and
put into their daily practice in the workplace. Organisational values, on the other
hand, refer to beliefs about socially or personally desirable end states or actions that
are explicitly or implicitly shared by members of an organisation. They function as
guides to what is seen as good and important in the organisation, and thus represent
the core ethics or principles which an organisation will abide by unconditionally,
spire employees’ best efforts and constrain their actions that prevent the organi-
sation from making progress towards its goals (Schwartz 1992; VandenBos 2007).
Organisational values can be examined as espoused and enacted values (Gopinath
et al. 2018). The former are a set of values and norms that directly influence how an
organisation operates and how employees function. Unfortunately, these values are
not always being translated perfectly into practice. The latter refer to the standards
and norms that are exhibited by an organisation and the employees on a daily basis.

The level of person-organisation value fit of the 17 middle management officers in
this study was assessed using subjective person-organisation fit. Subjective person-
organisation fit was measured using a three-item scale developed by Daniel Cable
and Timothy Judge (1997) and it directly assessed an employee's perceptions of
their fit with an organisation. To suit the study design, I modified the three-item
scale in the form of interview questions. Respondents were asked: 'To what extent
do you feel your values match or fit the organisation and the current employees in
the organisation?'; 'To what extent do you think the values and personality of the
organisation reflect your own values and personality?'; and 'To what extent do your
values match those of current employees in the organisation?'.

The results present two groups of respondents. Group 1 included 12 middle
managers who indicated that their work values were similar to the values of their
organisations from some to a moderate extent. Group 2 were the remaining respon-
dents who stated that their work values were similar to the values of their organisations
but only to a small extent. Group 1 identified four reasons why their person-organisa-
tion value fit was from some to a moderate level: low levels of work commitment and
motivation, weak top management support and lack of role clarify which can lead
to stress, poor prioritisation, lack of alignment with strategy and operational ineffi-
ciency. Group 2 highlighted that their person-organisation value fit was at low levels
because value for excellence (achievement, success and competence) was not their
most desired value or goal. They prioritised other value dimensions such as stability,
security, respect for individual rights, teamwork, collaboration and fairness. Second,
there was poor leadership characterised by the lack of leaders' ability to provide
direction which may stem from their own lack of vision. Third, there was the lack of
a conducive working environment which had great influence on employees' perfor-
mance, mood, behaviour and wellbeing. This may include aesthetic ambient lighting,
noise, visual distraction, thermal comfort and other related interior settings (Mohd
Yazid et al. 2015). Last but not least is a low level of organisational justice or fairness.
Organisational justice has been described as the perceived justness and fairness with
which organisations treat their employees, and is generally concerned with individ-
uals' perception of fairness of treatment received from the organisation and their
behavioural reactions to such perception (Greenberg 1990, 1993). Respondents in
group 2 perceived a low level of fairness with respect to the practices in organisa-
tional settings—the procedural justice dimension—and the treatment that employees
receive from others as well as from organisations—the interactional justice dimen-
sion. Such findings were also found in a study conducted by me on the relationship
between person-organisation value fit, organisational justice and cognitive styles
(Mahani 2011). The two justice dimensions complementing each other implies that
procedure is considered or perceived to be fair only when individuals are valued by
their authority figures or others in the organisation, as supported by the findings of
Russell Cropanzano et al. (2001).

To understand the mechanism of person-organisation value fit for achieving
operational excellence, the next section describes how shared values are trans-
lated into actions, practices and processes in Brunei public sector organisations
through the lens of other dimensions of operational excellence—leadership, human
resource management practices, operations strategy and culture involvement—along
with some challenges facing public services. These dimensions were highlighted
by the Prime Minister's Office in June 2019 when the public sector performance
grading programme towards excellent service delivery was widely formalised across
ministries (Kon 2019).
### 15.3.1 Translating Values and Value Congruence into Practice

Values vary between individuals and among different groups, and it can be challenging for individual employees to change or adapt to different organisational cultural values that are not core or are less meaningful to them because personal values are assumed to be relatively stable over time (Cohen 1995). Nevertheless, employees' personal values may alter when there are unforeseen monumental changes or increased friction that affects their roles, and the ways they support, relate to or work with people. About a third of the respondents said that the attainment of value internalisation across the organisation was trivial with a socialisation approach because they regarded coffee chats, get together events and organisational retreats, either formal or informal, as reciprocity rather than mutual obligation in social exchange. Both reciprocity and mutual obligation share similarities but they operate efficiently at different levels of status and responsibility (Hammer 2003). Employees' reactions towards accepting or rejecting the process of value internalisation in the organisation also greatly depend on their perception of the leader's integrity and leadership style (Cha et al. 2020).

### 15.3.2 Leadership

The effects of person-organisation value fit on individual and organisational outcomes are as important as understanding the personal values and innovative behaviour of leaders towards achieving operational excellence. Five respondents highlighted the significance of leadership integrity and asserted that leaders must behave in a way that they perceive as consistent with the organisation's espoused values such as respect for people and teamwork. Respondents in group 2 said that not only did they feel overwhelmed that their leaders kept giving them work, they also got confused with their key roles and responsibilities. Moreover, when things did not happen as planned in the organisation, they were blamed—a classic 'blaming culture'—and only got reprimanded by their superiors. There was no proper discussion with the superiors and there was a lack of guidance on how to deal with some issues. They felt that their leadership and decision-making skills were often underestimated, with instances when the superiors superseded their decisions without informing the person or people involved, and that their ideas got rejected and criticised harshly. They also pointed out that it was not the rejection of ideas that bothered them a lot but the way the criticisms were communicated to them. Overall, these presented three organisational problems: a lack of transparency, ineffective or negative communication and an unhealthy working environment, which had resulted in strained relationships between employees and leaders, low employee morale and a decline in productivity and the quality of public services.
Top leaders are assumed to have greater understanding about the organisation's vision, strategies and values. In order to work towards operational excellence, all respondents strongly agreed that leaders must lead by example and that their actions must be consistent with the organisation's espoused values. To gain trust and confidence of public employees, leaders must also be mindful of their actions because employees want to know if what they say and do is consistent. More than half the respondents expected their leaders to be innovative, risk-taking, proactive and anticipative in order for the organisation to keep up with the changes and be more responsive by talking to them over important issues. Although legislation and bureaucracy largely command the roles and duties of public leaders, leaders must stay flexible in their conceptual state of thinking to be able to respond to diverse scenarios, otherwise known as situational leadership (Ojala 2013). Situational leadership can help navigate employees towards operational excellence and address pressing challenges in today's work environment (McCleskey 2014). Along with effective managerial practices, respondents further said that changes in operational excellence required public leaders to stimulate and encourage staff innovation. This kind of transformational leadership is a style in which leaders encourage, inspire and motivate employees to innovate and create change that will help grow and shape the future success of the organisation (Bass and Avolio 1994). Although transformational leadership style has a positive effect on the achievement of operational excellence, there is no clear direct relationship between transformational leadership, value congruence and public sector innovation (Oon and Hartini 2014). In essence, employees need the ability, motivation and opportunities to contribute to innovation. As the Organisation for Economic Co-operation and Development highlights, 'human resource management (HRM) is an important lever for supporting public sector innovation by enabling managers and front-line staff employees to formulate ideas that result in new and improved ways to deliver public services' (OECD 2017: 196).

### 15.3.3 Human Resource Management Practices

Human resource management practices play a critical role in enhancing value internalisation and increasing the level of person-organisation fit between individual employees and the organisation. Edgar Ennen and Ansgar Richter (2010) refer to the human resource routines that are undertaken to manage specific skills, values and knowledge of employees. The practices also include policies and systems that influence employees' behaviours, attitudes and performance (De Cieri et al. 2008). Much of the role of human resource management in today's dynamic operating environment is not only transforming but its focus is also changing. About two-thirds of respondents said that improvements in Brunei's human resource management practices have determined changes in the way the public sector cooperates with and forms partnerships and collaborations with outside organisations. Performance management systems are changing and evolving with the assistance of technology. A shift from job-based to performance-based culture is expected to address inefficiencies in the
government's administration and services. The respondents indicated that the value internalisation process is achievable in two settings: across smaller departments with fewer employees; and with new employees who become accustomed to the organisation. Another aspect of human resource management practices in Brunei's public sector that requires review is the recruitment process. A few respondents suggested the government should create a clear hiring strategy and improve the interview and assessment processes in order to hire the right people for the job.

Values, even though shared, 'are complex in the sense that they are capable of very different interpretations by different people and in different situations' (Fulford et al. 2012: 41). Organisational values in the public sector conform to the Brunei Civil Service Code, but with a varied degree of importance of actions and interpretations by government agencies and departments at all levels. In response to the sultan's speech in 2018 reminding top public management leaders not to fall into the trap of cronyism and nepotism (Hadthiah 2018), several respondents emphasised that the recruitment and selection process in the public sector must be transparent and based on merit and best-fit with the organisational goals and values and not based on connections or relationships. Overall, for an organisational value system to work in the public sector, values need to be translated into behaviours and sustained actions which in turn lead to organisational performance. This must also be complemented with skills and knowledge for employees to offer excellent public services and performance as service strategy can help to ensure that public sector organisations are in a better position to handle the costs and risks associated with their service portfolios.

### 15.3.4 Service Strategy

A majority of the respondents in this study related service strategy to the service offering and service delivery system. The service operations concept refers to all tangible and intangible elements of service delivered to the customer (Roth and Menor 2003). The delivery system converts the inputs into services in a controlled and planned manner (Armistead 1990). Marcel van Assen (2011) also operationalises service strategy in terms of culture of continuous improvement. To design an effective public service delivery system for operational excellence, four respondents highlighted the value of collaboration between employees and leaders to look for innovative ways to satisfy stakeholders with improved quality and service and advanced technologies. They said that although collaboration efforts among public sector organisations and other agencies—a 'whole of government' approach—are increasing, they lasted a short time and not after a project or programme was completed. The issues with collaboration in the public sector are the lack of ownership, especially when problems arise, and weak coordination among employees and leaders within and outside the organisation which have caused long delays in delivering public services.

Two respondents said that their leaders tended to overlook service strategy because they spent too much time micromanaging at work. The leaders revised their work
instead of giving them feedback on what could be improved (a one-way conversation only), complained constantly and always looked for their mistakes. The leaders might think that they push them for excellence but the reality is that they are sapping the motivation of their employees, which in turn could lead to employee grievances. Several respondents also said that their office leaders acted more like managers than real leaders. The leaders failed to see the big picture given that they were so much involved with activities at the operational level and spent less effort dealing with strategic matters. Skills and knowledge transfer was not perceptible and the direction of organisational change was unclear to the employees.

### 15.3.5 Cultural Involvement

Involvement is one of the cultural traits classified by Daniel Denison et al. (2004) as organisational culture. It is the best value dimension to push excellence within the organisation (Oon et al. 2013). Cultural involvement requires all employees in an organisation to have a strong commitment and sense of ownership and to be able to connect themselves to the goals of the organisation. Although many respondents supported the idea of having a cultural involvement trait in the organisation, four of them were not convinced that it could be exercised for two reasons. First, not all public sector employees had the authority and the right knowledge to be involved in government affairs. Second, employee participation included a broad range of activities through which employees may have been able to express their opinions on how the government should conduct its business.

Building a culture of involvement in an organisation is undoubtedly the most challenging of all leadership endeavours, and value conflicts can be difficult due to differences in perspectives and practices at different levels. For example, one respondent said that his interpretation of the organisational value 'respect for people' was to avoid conflicts at all costs, which implies that when he disagreed with other people's views in a meeting he kept quiet and omitted his thoughts. This may be the safest thing to do to avoid unnecessary conflicts, but the problem is the organisation failed to realise that the respondent's thoughts or ideas might contribute to more innovation success. If such behaviour continues over time, it not only affects employees' productivity at work but also undermines their confidence and willingness to take appropriate risks. It can also lead to low morale and creative paralysis. Five respondents who perceived themselves as having a low level of person-organisation fit argued that did not always and necessarily mean it was based on value conflicts. It could just mean that the organisation needed to make greater effort to facilitate the value internalisation process and create platforms where discussion on the organisational value system could take place for employees' learning and growth. Stability is necessary to keep employees continuously engaged positively, but so is adaptability. A few studies have shown that value congruence can lead to a better adaptability of employees to the work environment and involvement in the work itself, and that it unites and focuses members of the organisation (Vandenberghe 1999; Li et al.