The core objectives of the study are: (i) to choose an appropriate methodology to evaluate the performance of public enterprises, such as the sugar mills of Bangladesh (ii) to empirically measure the performance of these mills (iii) to build a model to explain the variation in the performance of these enterprises (iv) to measure managerial performance therefrom, adjustment having been made for variables beyond the control of the manager and (v) to recommend measures to improve the performance of the sugar mills.A systematic review of competing methodologies on performance evaluation led to identifying the most appropriate indicator of performance measurement: public profitability, or quasi-rent per unit of fixed capital. For comparative purposes, financial profitability was also calculated. The mills were found on average to be profitable both financially and economically.An analytical model was built to explain enterprise performance in terms of variables both beyond the control of the manager and within his control. The model was then used to actually measure the performance of individual managers.Economic profitability indicators, though ideal for normative measurement of enterprise performance, were not appropriate for empirically estimating the performance equation because managers had not been advised to adjust their behavior to these indicators. The equation based on financial profit was therefore estimated. The model demonstrated a high explanatory power. The sucrose content of cane and the output-input price ratio were found to be important explanatory variables. Effects of other variables were empirically insignificant.The study covers both financial and economic performance. Financial performance is based on the conventional profit and loss statements. Economic performance, on the other hand, incorporates the quantifiable costs and benefits from society's point of view.The estimated coefficients of extra-managerial variables were used to compute the predicted profit due to these variables the differences between the actual and the predicted value then measured managers' contribution to enterprise profit. Divided by the capital assets, they yielded indicators of managerial performance which were tenuously related to enterprise performance with rank correlation coefficient equal to 0.25.The low value of the coefficient implies that instead of treating enterprise performance as synonymous with managerial performance, the authorities have to compute two sets of performance indicators--one for the enterprise and the other for the manager--if they intend to resolve the difficult problem of measuring public enterprise performance.
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