Despite the numerous efforts of public sector departments and agencies, there are few effective performance measurement systems (PM Systems) in place. In fact, while there are many effective PM Systems in organizations world wide, the vast majority of such efforts fail. In short, most PM Systems do not:
There is still much confusion about performance measurement. Some individuals consider it to be Performance Appraisal designed to assess individual effectiveness. Others consider it to be an automated Management Information System embodied by such tools as Cognos Business Intelligence and other Commercial-Off-the-Shelf -Tools (COTS). Still others see it as a report containing lots of data but no relevant information. The confusing and inaccurate understanding of performance measurement render it among the most threatening and most fiercely resisted of all management disciplines.
In many cases, lip service is paid to its development and use when in fact decisions continue to be made by the â€œScience of Muddling Throughâ€ or by personal and/or impressionistic view of everyday situations. In any case, this lack of understanding severely prejudices the effective use of PM.
An effective understanding of PM has 4 dimensions:
Overall, performance measurement is a management system – anÂ ongoing process that provides balanced, methodical feedback to assess the effectiveness of an organization’s operations from multiple vantage points – financial, client satisfaction, service delivery and the employee dimension. The feedback is used at all levels – strategic, tactical or operational – on to assess how well strategies and initiatives are succeeding. This performance information is necessary to improve decision making within the organization, to enableÂ proactive problem correction and to promote continuous improvement.
Understanding and promoting performance measurement as a multi-dimensional discipline increases greatly the likelihood that departments will have a greater appreciation of its essentiality as a management tool. As such, it becomes easier to address the individual and organizational resistances. Without this foundation, building the business logic to develop and implement a PM System is vastly more difficult, if not impossible.
Performance Measurement is a relatively new science and as a result there are few methodologies that provide a step by step guide to develop and implement PM Systems.Â There is an expectation fostered by many staff members at all levels of the organization that a PM System is a â€˜Plug and Playâ€™ initiative.Â Nothing could be further from the truth.
Without a methodology in place to define the structure, outline roles and responsibilities and determine the business processes needed to generate, analyze, interpret and report information, and the means to facilitate the establishment of leadership to create an organizational culture supportive of such a highly threatening project, failure is inevitable.
What is required is a step-by-step methodology that builds understanding and support in the organization, while transferring knowledge and skills needed to make it the PM System self-sustaining and self improving.
The balance of this article introduces the reader to a tried and true methodology for the implementation of a vigorous and successful performance measurement system.Â It is based upon the Leadership Driven Method (LDM) 1 of developing a Performance Measurement System.
There are certain prerequisites necessary to successfully engage the organization and staff in Performance Measurement. While it is prudent to build upon the existing and valid performance measurement elements, it is often difficult to determine an organizationâ€™s level of readiness to undertake such a more robust endeavour in terms of:
The absence of any of these elements severely limits the success of such an enterprise.
Conducting a Readiness Assessment is a Risk Management tool designed to assess the gap between current and needed performance measurement practices and processes. This assessment is used to:
This Readiness Assessment is mandatory to improve understanding and to begin to build support for the project among the uninitiated members of the organization.
In most organizations there is no strategy that provides a roadmap outlining all the elements of the PM System and the order in which they should be developed and implemented. These elements include:
Effective PM Systems are based upon the foundation of a PM strategy that provides:
The foundation of a PM System is built upon a results chain that cascades from the vision of an organization right through to its strategies and initiatives (Diagram 1).Â The logic and power of the Strategy Map can best be explained as a Business Planning and Performance Measurement Framework which breaks the organization into a logical and interrelated chain of organizational functioning. At its most basic level, the logic of the Strategy Map can be understood as follows:
Wherever there is a breakdown in the results chain of the Strategy Map, the possibility of achieving organizationsâ€™ strategic direction is nil. Instead, organization functioning is reduced to managing issues on a day-to-day basis and/or in crisis management. In other words, most organizations are engaged in work that is unplanned, uncoordinated, uncooperative or unscheduled.Â The organization becomes fixated on the process of doing the work rather than on producing tangible results.
There is a causal linkage between the achievement of an organizationâ€™s strategic direction and its strategies, initiatives and performance measures. Each element performs a vital role in cascading chain of causality.Â This Strategy Map is a missing or misunderstood component in many public sector organizations.
In reality the understanding and use of the Strategy Map concept is very limited in the public sector as a whole. Because of the resources and leadership requirements needed to introduce it a whole organization, the success ratio is much higher when used at the branch level. Creating a Strategy Map for discrete function corporate functions such as Acquisitions or Information Technology or with a program-specific function holds a much greater promise of success of instituting a successful PM System.
Performance Measures specify the design, content and structure of the PM System. They are designed to provide feedback on the organizational accomplishments and issues interfering with the attainment of the organizations strategic direction. This feedback is used to provide the information needed to improve financial, service delivery, client/employee satisfaction decision making within the organization. It also enables proactive problem correction and helps to institutionalize continuous improvement. It is the basic ingredient necessary to move public sector organizations from ad hoc, crisis management style to an operational and proactive approach.
Effective performance measures are objective, simple, and quantifiable; outputs/results oriented and include qualitative and quantitative information.Â Within the public sector today, performance measures are ineffective for a number of reasons:
Improving the relevance and quality of performance measures is key to providing management with the ability to make effective decisions. This can be done by:
Indexes = Performance Measures = KPIs
An index is a â€˜super measureâ€™ or the highest level of measure
Each index is composed of Component Measures
Within each component measure, there are Indictors
Indexes are relatively inexpensive to construct, easily summarized for management yet provide the ability to drill deeper if needed.Â They can also can be tailored to the specific level of complexity and can be reported in an easily interpreted manner using a â€˜management dashboardâ€™.Â A sample of the dashboard concept is provided below using a Project Measurement Index. 2 It consists of four component measures: financial, functional, technical and issue management. Each of these component measures consists of a number of indicators. For example, the financial component consists of the following indicators: on time, within budget and on scope.
Interpreting the dashboard is relatively straightforward.Â Green indicates that all is proceeding as planned and there are few, if any issues to be dealt with.Â Yellow indicates that there are unresolved issues that are being addressed but that may have an negative impact in the future.Â Red indicates that management intervention is required immediately.
A most overlooked aspect of performance measurement is the information required to support the implementation of a PM system. When it comes to assessing existing sources of information needed to support the approved performance measures, there is almost always a gap. This situation is especially true with the performance measurement information required to assess service delivery, client/stakeholder satisfaction and employee morale.
A Measurement Profile for each performance measure is needed in order to assess the degree to which existing business processes must be developed or adapted in order to generate the performance measurement information for each performance measure. The measurement profile describes,
This analysis also defines who is responsible for providing the information, the audience for whom it is intended, and the frequency of reporting.
The completion of the measurement profile provides a complete inventory of the information required to support the PM System. It provides the basis to complete a detailed project plan to develop or adapt business processes required to generate information for each performance measure.
Statistics gathered, is simply data.Â The data need to be analyzed to be transformed into information and the information must be assessed in order to provide knowledge. There are two skill areas that are required: data analysis and interpretation.
Performance information must be analyzed to determine trends or patterns in the information. Two general themes need to be captured: organizational achievements and the issues (related to finances, service delivery, client /stakeholder or employee satisfaction or others). Both dimensions of performance measurement are equally important. However, it is â€œorganizational achievementsâ€ that are almost universally given short shrift.Â When describing issues usually the most obvious are stated without a further examination and analysis into the root cause, i.e., what are the patterns related to organizational performance among client groups, over time or in different regions. Are client expectations realistic given organization needs?
Given that organizational issues are identified, the next step is to properly interpret the issues. That is to determine â€œWhat is a normal level of performance within the organization?â€Â For example, imagine that the PM System reveals that there is a 10% turnover rate among IT staff. Is that a normal level of attrition for the industry, or the department?Â Should the manager focus on trying to retain and attract new IT resources. The ability to properly interpret performance information is the most important and least understood aspect of performance measurement.
It is crucial to develop a broad set of performance interpretation methods to determine a normative level of organizational functioning from financial, service delivery, client/stakeholder and employee satisfaction viewpoints. This normative level is determined using baseline information, benchmarks, service standards, confidence intervals and others. These performance interpretation skills must be developed among key staff members.
Unless the PM System can be made self sustaining as an integral element within the organization’s operations, it will ultimately fail. Three integration strategies are required during the entire development and implementation of the PM System:
The development and use of these integration strategies throughout the creation and implementation of the PM System is a prerequisite to ensure that the PM system becomes a self-sustaining.
Why bother with all the effort and expense required to measure performance? This question is ably answered by David Osborne and Ted Gaebler in their book â€œReinventing Government. 3
Good performance measurement would provide departments and those who work within them the ability to:
Finally, and by no means least, sound performance measurement provides the means of translating theÂ mission and vision of the organization into concrete strategies and plans thatÂ can be monitored and adjusted continually in response to ongoing changes to client, employee, technology, and fiscal requirements andÂ constraints.
1 Bryan Shane, â€œPerformance Measurement System-A Leadership Driven Methodologyâ€, Optimum Online, The Journal of Public Sector Management, Volume 33,Â Issue 3, September 2003.
2 Bryan Shane, Patricia Lafferty,Â â€œMajor Project Measurement-An Excellence Driven Approachâ€ Optimum, Online, The Journal of Public Sector Management, Volume 35, Issue 1 , March 2005.