Boosting the effectiveness of performance management systems and performance of public organizations: insights from Indonesia

Purpose This study aims to examine the influence of Clear and Measurable Goals (CMG), Incentives (ICV), and Performance Feedback (PFB) on the effectiveness of Performance Management Systems (EPMS) and Performance of Public Sector Organizations (PPO) in Indonesia. Additionally, it explores the mediating role of PMS effectiveness in this relationship. Design/methodology/approach The research uses a quantitative approach, collecting primary data through a survey distributed to 221 Heads of Departments within local government agencies (SKPD) in East Java Province, Indonesia. To compare the relationship between PMS effectiveness in SKPDs with high and low levels of customer pressure, a multigroup analysis is applied using a recently proposed evaluation procedure designed for PLS-SEM. Findings The study reveals that ICV significantly and positively affect PPO. In contrast, CMG and PFB do not show significant direct effects. However, EPMS mediates the relationship between CMG, ICV, and PFB with PPO. The findings highlight EPMS as a critical mechanism linking CMG, ICV, and PFB to PPO, providing both theoretical refinement for PMS research and actionable insights for strengthening performance governance in Indonesian public organizations. Originality/value This study offers novel insights into performance management literature by providing empirical evidence from the Indonesian public sector and by integrating goal-setting theory, agency theory, and institutional theory to explain how performance management practices translate into organizational performance through the EPMS. This study introduces the mediating effect of PMS effectiveness, offering a deeper understanding of how CMG, ICV, and PFB influence organizational performance in the public sector.