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SECTION 2: BEST PRACTICE IN ORGANISATIONAL PERFORMANCE MANAGEMENT

Section introduction

2.1 In this section a range of organisational performance management tools and techniques are considered many of which are found in contemporary public management practice both in the UK and globally. There is clearly no 'one best practice' but there are trends in organisational performance management in the public services which have achieved a high degree of consensus amongst their users.

2.2 This section makes use of the Hicks and Gullett (1981:54) framework (see Introduction and Context) of Pre-control, Concurrent Control and Post-Control to differentiate between the timing and scheduling of different modes of control and the tools and techniques utilised by the various controls.

Pre-controls: Strategic management and strategic and operational planning

2.3 A strategy is a decision or series of decisions made within an organisation which determines its medium to long-term objectives, priorities and overall direction. It re-positions the organisation in relation to its external environment including the availability of key resources. Strategic management refers to a set of processes comprising strategy formulation, strategy implementation, monitoring and control.

2.4 The strategic management process is cyclical and ongoing. In public management it is not uncommon for strategic plans to be submitted by publicly funded organisations to government (or its agencies) for scrutiny and approval on an annual basis.

2.5 Strategic Plans are pre-controls and formalise the longer term strategic aspirations of the organisation. Operational Plans are also pre-controls and provide detailed guidance on the ways in which the organisational sub-units will contribute to the achievement of the strategic aspirations in the short to medium term. Planning is an essential pre-requisite for effective organisational performance management.

Concurrent controls

2.6 There are a number of different types of concurrent controls, including dashboards, traffic lighting and balanced scorecards.

Dashboards

2.7 Dashboards are concurrent controls. The Atlanta Dashboard, for example, is a performance management tool that the City of Atlanta uses to track the effectiveness of City services and to hold its managers accountable for service delivery. Each year the City develops a strategic plan based on input from citizens and other stakeholders. Based on this plan, performance targets are established for all operating divisions. The Atlanta Dashboard allows the tracking of performance against those targets on an ongoing basis. The City Mayor (Franklin) holds weekly meetings with her senior management team to review progress against those targets and to make operational adjustments if needed.

2.8 The Atlanta Dashboard is organised around the four major strategic goals of the Mayor: A Safe City; a Strong Infrastructure; an Efficient and Effective Government; and a Financially Stable Government. Within each of the four major strategic goals there are supporting strategies that help to achieve those goals. The dashboard "cascades" downward through the supporting strategies to the performance measures.

2.9 Dashboards are commonly colour coded using a 'traffic light system' ( RAG: Red-Amber-Green) to help quickly identify problem areas. Boxes that are green indicate that it is on plan. Red means that it is off plan and intervention is required. Yellow boxes alert management to measures that are off plan but not to the point where an intervention is required.

2.10 Dashboards help to make the performance of an organisation and its sub-units more transparent and accountable to the public. Dashboards help to accomplish this by making the performance goals known to everyone and to make progress against those goals publicly available. The Atlanta Dashboard omits all aspects of internal business processes in favour of the exclusive concern for outcomes.

2.11 CitiStat is also a concurrent control and an accountability tool based on the CompStat program pioneered in the New York City Police Department by Jack Maple. CompStat, utilizing computer pin mapping and weekly accountability sessions, helped the NYPD dramatically reduce crime and is employed today by several police departments around the world.

2.12 A recent study of pilot schemes in Scotland by Sharp et al (2006) concluded that Citistat has worked in the United States as a consequence of its combination of review, enhanced use of data and its accountability process. The key elements in Citistat are:

• Active leadership promoting improvement, scrutiny, accountability, prioritisation, partnership and the challenge process;
• Enhanced data quality and analysis to ensure that the performance information facilitates concurrent control with as much real-time data as possible;
• Ownership of the indicators and subsequent actions;
• 'Hot spots and whole system working'; and
• Cultural and organisational change.

2.13 The Scottish pilot schemes did not generate any conclusive evidence on the claimed merits of Citistat and concluded that any future wider implementation would have to take into account the diverse governance arrangements which exist in the public sector and to ensure that it remains complementary to existing monitoring and evaluations systems.

Traffic lighting

2.14 Many public service organizations find this a helpful tool, particularly with respect to those performance indicators which are crucial to the success of the organisation in achieving its strategic objectives. In the UK, for example, traffic lights are used in a strategic direction context to show how 'Headline Indicators' are changing. Headline indicators are those indicators which focus on the broad strategic direction which the organisation hopes to achieve. They show only the direction of travel, not necessarily whether progress is fast enough. But it needs to be borne in mind that there are time lags between action and movement of an indicator, so traffic light judgements are not necessarily a good gauge of a strategy's effectiveness. A common approach is:

2.15 There should also be a note of caution when acting on traffic light data as it is a 'snap shot' and identified sub-standard performance may be short term with the performance improving shortly thereafter without the need for a 'knee jerk' rapid response to a perceived deviation in the level of performance expected. Neil Carter (1991) used the terms 'dials' and 'tin-openers' to describe different uses of performance indicators. Traffic light systems are 'dials' in that they indicate current status and organisations must use traffic light performance information as a 'tin-opener' prompting further analysis of trends and reasons for performance levels achieved (both above and below desired performance).

2.16 A common approach when using concurrent controls is known as 'management by exception' and involves managerial action only when a deviation is detected which takes performance outwith previously determined performance parameters. If performance is within the agreed parameters then no action is required.

Balanced scorecards

2.17 The Balanced Scorecard is a set of measures that are directly linked to the organisation's strategy. The scorecard allows managers to evaluate the organisation from four perspectives: financial performance, customer knowledge, internal business processes, and learning and growth.

2.18 Inside the Balanced Scorecard is a concise definition of the organisation's vision and strategy. Surrounding the vision and strategy are four additional boxes; each box contains the objectives, measures, targets, and initiatives for one of the four perspectives. A properly constructed scorecard is balanced between short- and long-term measures; balanced between financial and non-financial measures; and balanced between internal and external performance perspectives. The scorecard is a management system that can be used as the central organising framework for key managerial processes.

2.19 Managers determine what is required to deliver and sustain the strategy and how to monitor progress in terms of the four dimensions:

• Finance
• Customer
• Process
• People.

2.20 The respective measures within these dimensions are used to communicate the strategy, to allocate responsibilities and time frames and to monitor progress. The Balanced Scorecard focuses all parts of the organisation on the critical success factors and shows how each part becomes a determinant of the eventual strategic outcome.

2.21 The Balanced Scorecard was designed for the private sector as a strategic management tool by Kaplan and Norton (1996) and places financial results at the head of the strategic hierarchy. In the Public and Voluntary Sector there is a different focus, with the overarching mission or long-term objective of the organisation sitting at the head of the hierarchy. Within this context, funders (or donors) represent the 'finance' aspect of the framework. They are on an equal footing in the hierarchy with the people the organisation helps, e.g. service users (the 'customer' element). The internal processes must be identified that will deliver the desired outputs and outcomes for both groups. The objectives within the scorecard can then be orientated towards the achievement of the high level mission.

2.22 The financial perspective for public sector models differs from that in the private sector, in the private sector the key financial objectives relate to profitability and returns on investment. In the public sector financial considerations will have an enabling or restraining role but will not be the only criterion for assessing strategic options. Success for local authorities and health boards can be measured in terms of how effectively and efficiently they meet the requirements of their key stakeholders (Government and the general public).

2.23 The client/ customer perspective focuses on the ability of the organisation to provide quality goods and services. It includes issues about the effectiveness of service delivery and overall client/customer service and satisfaction. In general the customer perspective is the primary focus for a public service. Public bodies are also more likely to have a duty of care perspective than private-sector organisations.

2.24 The internal business process perspective covers the internal business results that lead to financial success and satisfied customers.

2.25 The people perspective covers the competence of staff and the capacity of organisational members to develop individually and collectively to enhance organisational effectiveness.

2.26 Griffiths (2005) concludes that the New Zealand experience of using balanced scorecards in Government and Crown entities resulted in modification to the original Kaplan and Norton (1996) model. The key use of the balanced scorecard was not as a strategic management tool but as a tool for clarifying and translating the organisation's strategy (operational).

Post-controls

Reporting

2.27 Public sector organisations globally are required to account for their performance at least annually to funding bodies and to Government.

Audit

2.28 Public sector organisations are required to have effective internal audit systems and are required to undergo annual financial audits of their financial procedures and their accounts.

Inspection

2.29 Many public services including Schools, Social Services, Police and Fire are subject to periodic inspection by agencies who then publish reports on the findings of the inspection.

Best Value

2.30 Best Value was introduced on a voluntary basis in 1998 following the Programme for Government. Best Value became a statutory duty following the Local Government in Scotland Act 2003. The objective of Best Value is to ensure that management and business practices in local government deliver better and more responsive public services. The nine elements in the Best Value framework are: Sound Governance at a Strategic and Operational Level; Responsiveness and Consultation; Commitment and Leadership; Use of Review and Options Appraisal; Joint Working; Sustainable Development; Equal Opportunities; Sound Management of Resources; and Accountability (see Appendix II, p36).

The use of performance management tools in government

2.31 Research shows that there are multiple tools and techniques being used globally in public sector performance management . There is clearly a tendency towards colour charts and diagrams providing a snapshot of the current status of actual performance against planned performance using information which is a close as possible to real time. These tools have most significance where the focus of the performance relates to service inputs, process and outputs and is disaggregated by service and residential area. Corrective action can be introduced relatively quickly and the expectation is that the corrective action will have a short term impact. Difficulties arise when the focus of the performance is on national level outcomes pursued over the longer term. However 'dashboard' type communication of performance status does have a place in government performance management systems.

2.32 Government's success or otherwise in achieving policy outcomes will be as a consequence of aggregated performance over a period of time. If sub-units and programmes are achieving their objectives then they will contribute to the attainment of organisational objectives. This is an approach development from Drucker's (1955) 'Management by Objectives' ( MBO). There are difficulties in the process by which long term outcomes are translated to shorter term targets and subsequent cascading of targets horizontally and laterally (through organisational hierarchies and between organisations). But the process of attempting to translate outcomes into process and output targets can be of value in itself as it can lead to a better understanding on the part of organisational members of the fundamental purposes of their roles and the ultimate consequences of their performance.

2.33 Many academics remain critical of managerialism in the public sector but others believe it is better to approach the task of public service provision with greater clarity of desired future and a well developed sense of direction. Tools of performance management must contribute to more effective public management but there is much research and evaluation required to determine the ways in which generic management approaches can be adapted for the distinctiveness of public services organisational performance management.

Key points

• There are many tools and techniques used by private and public sector organisation as part of their systems of organisational performance management.
• The key to effective organisational performance management is to have those tools and techniques which are appropriate to the organisational context. Caution should be exercised when transferring tools and techniques from the business world into a public service organisation. The transferred tools and techniques must take account of the specific context of the public service organisation.
• Effective organisational performance management requires pre-controls in the form of strategic and operational plans.
• Strategic and operational plans require concurrent controls to provide feedback on performance achieved against target, performance trajectories and the early identification of performance issues utilising 'management by exception' reporting.
• Tools and techniques of concurrent control include dashboards, balanced scorecards and traffic light reporting systems and these can all be adapted for use in the public sector.
• Organisational performance management also requires tools and techniques of post-control to allow the organisation to review, evaluate and report on performance attained and to reflect of what worked and what didn't work in an effort to learn and to continuously improve.

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