STRATEGIC PERFORMANCE MANAGEMENT - Bernard … · 3 STRATEGIC PERFORMANCE MANAGEMENT Performance...

STRATEGIC PERFORMANCE MANAGEMENT IN GOVERNMENT AND PUBLIC SECTOR ORGANISATIONS

A Research Paper by Bernard Marr, Advanced Performance Institute

Co-Sponsored by CIPFA Performance Improvement Network

and Actuate

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STRATEGIC PERFORMANCE MANAGEMENT

Contents

About this survey …………………………………………………………………… 3

Section 1: Survey Results …………………………………………………………… 7

– Introduction

– The Performance Management Imperative

– From theory to good practice: defining Performance Management

– Key Findings

Section 2: Best Practices …………………………………………………………… 9

– The 10 principles of Performance Management

Conclusions ………………………………………………………………………… 27

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Performance Management in the Public SectorPublic sector organisations may have the most ambitious plans for transforming services and delivering against government targets, but if they don’t keep day-to-day activities tightly aligned to what actually matters, they’ll find themselves getting nowhere fast.

About This Survey The Advanced Performance Institute (API) research project, Strategic Performance Management in Government and Public Sector Organisations – A Global Survey, is the largest and most comprehensive global study of government and public sector Performance Management to date.

The reasons for conducting the survey were two-fold. Firstly, the Advanced Performance Institute noted an increasing number of Performance Management initiatives across the public sector, but found the assessment of the results for these initiatives to be more anecdotal than comprehensive (see Section 1: Survey Results). Secondly, the API intended not just to understand the current state of affairs in public sector Performance Management, but also to glean information on what factors and behaviours contribute to Performance Management success (see Section 2: Best Practices).

The extensive international study surveyed a wide cross-section of government and public sector organisations, including central or federal government agencies, state and local government bodies, as well as national health organisations, police forces, fire and rescue organisations, courts and education institutions.

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Australia (12%)

Canada (15%)

United States (37%)

United Kingdom (36%)

Respondents by CountryFigure 1

37%

12%

36%15%

Health care (12%)

Education organisation (7%)

Police, fire, emergency services (22%)

Regional/local government organisation (31%)

State/provincial government organisation (0%)

Central/federal government organisation (28%)

Figure 2: UK Respondents

12%28%

31%

22%

7%

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Figure 3: US Respondents

Health care (0%)






Figure 4: Canada Respondents

Health care (13%)






Figure 5: Australia Respondents

Health care (14%)






28%

25%19%

20%

8%

21%

14%

22%

23%

7% 13%

22%

11%

24%

22%

7% 14%

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This research was conducted by the Advanced Performance Institute in collaboration with the CIPFA (The Chartered Institute of Public Finance and Accountancy) Performance Improvement Network, and Actuate Corporation.

In each of the organisations, the chief executive (or equivalent) as well as the performance manager (or equivalent) were approached in order to get both an executive view and the view of the person responsible for Performance Management. All respondents were asked to reply for the organisation as a whole and not for any particular subsidiary or division.

The data was collected through an online survey tool which is a feature of the Advanced Performance Institute web site (www.

ap-institute.com). In various cases, surveys were followed up with phone calls, especially in cases where only one response was received.

The research took place at the end of 2007 and early 2008, targeting more than 1,500 government and public sector employees and producing 1,104 substantial responses from 507 organisations. This response rate of 33% is notably higher than the industry average, lending even greater credibility to the findings. Equally noteworthy is that the findings were consistent across the four participating countries, indicating that the issues raised are endemic to public sector Performance Management, regardless of the geographical region.

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The Performance Management ImperativePerformance Management has never been more critical in the public sector than it is today. Governments around the world now take this extremely seriously and many have introduced legislations and frameworks for this specific purpose in the organisations that report to them.

In the US, for example, successive presidents have made Strategic Performance Management part of their management agenda. Back in 1993, the US passed the Government Performance and Results Act which forces the head of each government agency to submit to the Office of Management and the Congress a strategic plan detailing the strategic aims and performance indicators. The key performance results are then aggregated into an executive branch management scorecard, which is published for everybody to see.

In Canada, the government has introduced a management framework for departments and agencies that includes a commitment to measurable improvements in client satisfaction. In Australia, all government departments, agencies and business enterprises that deal with the public are required to develop customer service charters. In the UK, the government has created a set of 90 so-called Best Value Performance Indicators to measure Local Authority performance, assessed annually by the UK Audit Commission. This system is now being replaced by a Comprehensive Area Assessment with 198 National Targets at its core.

There are similar initiatives in China, Sweden, the Netherlands, as well as other, performance measurement initiatives focusing more specifically on the police forces, health services, schools, universities, cities, etc.

What most of these initiatives have in common is that they provide frameworks for managing and measuring performance; many prescribe performance indicators with targets; and several make the measurement data publicly available, for example via league tables or performance scorecards.

Yet as worthy as these intentions and processes are, many public sector organisations approach Performance Management very mechanistically, with an emphasis on collecting and reporting data, often simply to keep regulators happy. Many appear to have lost sight of the value of the exercise and the benefits that they, as budget-managing, public-serving enterprises, could glean from the results.

The research set out to investigate the problem in detail, and identify and test some of the principles that make Performance Management work and that allow organisations to move beyond ‘measuring everything that is easy to count’ towards true strategic Performance Management, leading to enhanced learning, better decision-making and real performance improvement.

From Theory to Good Practice:Defining Performance ManagementStrategic Performance Management is about defining, assessing, implementing and continuously refining an organisation’s overall ‘business’ strategy.

This goes far beyond the narrow definition of Performance Management, which is often used simply to describe the act of performance measurement and reporting, or simply people management. Strategic Performance Management is about identifying what matters, measuring this and then managing it to improve the effectiveness, efficiency and overall performance of an organisation.

Section 1: Survey ResultsIt is astonishing, given the blood, sweat and tears spent by public sector decision-makers as they try to come up with winning new strategies to meet government targets, that so little attention is paid to ensuring that operational activities measure up and deliver against their own top-level goals. Yet this is the stark reality among public sector organisations across the globe, according to shocking new findings from the Advanced Performance Institute.

Delving deeper into the phenomenon in a comprehensive 2007-08 market study, the API, in collaboration with the CIPFA and Actuate Corporation, has come up with 10 principles for effective Performance Management, which pressurised public service organisations would do well to abide by if they want to bring everyday operations back in line with top-level strategy.

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It does not measure performance for measurement’s sake, but in a way that’s relevant to what the organisation is trying to achieve on a broader scale, and in a way that can then be fed back into every employee’s daily working life, enabling transformational change to produce real results.

Key FindingsThe survey finds that organisations that apply the principles of Strategic Performance Management can well outperform those that don’t, and it clearly highlights that many public sector organisations have an obsession with measuring performance, but fail to manage it.

So what is holding so many of these organisations back from seeing the expected performance improvements? In many instances, government and public sector organisations have made huge progress with Performance Management, but the implementations are often too mechanistic and numbers-focused, which prevents improvements in performance. This means that the focus is often on ‘outputs’, typically things that are easy to measure (e.g., the number of flyers dropped through doors promoting the use of carbon monoxide detectors in homes), instead of ‘outcomes’, which are the ultimate goals of the organisation in question (relating to the previous example, measuring the number of deaths from carbon monoxide poisoning in a community might be the corresponding outcome).

This focus on what is easy to measure leads to another common problem in the public sector: organisations are drowning in data but thirsting for information. By measuring what is easy to measure, rather than what is strategically important to the organisation, the chance for driving efficiency and performance improvement can be dramatically reduced.

Why does this happen? One reason is the lack of a clearly mapped strategy, analogous to rowing a boat forward without ever telling the rowers which direction to aim for. Only 15% of the respondents to the survey feel that all their indicators are linked to the strategy of the organisation, and even less (6%) believe that all their performance indicators are relevant and meaningful – perhaps not surprising given that 16% of organisations expressly feel that their objectives are not clearly articulated at all!

The findings confirm that merely having a set of performance objectives and performance measures in place does not lead to better performance. In fact, it often leads to a decrease in

performance with perverse and dysfunctional behaviours such as sub-optimisation, target fixation, and juggling data. In the survey, 68% of organisations believed that some performance data had been fabricated. This means tthat some systems can’t be trusted and that they therefore provide invalid input into the decsion making process, possibly leading to the wrong or counter-productive decisions and resource allocation, and ultimately failing to improve public accountability.

This astonishing perception that data can be manipulated is likely to be driven by top-down control style of measurement from central and regulatory bodies, compounded by poor management understanding that Performance Management should be used to enable self-management and learning in order to improve performance. When Performance Management is mainly used to control people, it tends to cut off any routes to learning and drive gaming and other undesirable behaviour.

These findings are important in a world where the use of performance measurement and Performance Management has mushroomed among government and public sector organisations, often proposed as the solution to problems of efficiency and effectiveness in service delivery. Yet it is the way that Performance Management is handled and directed that makes the biggest difference between top-performing and failing public sector organisations. Those who indulge in the practice merely to keep external moderators off their backs are missing out on a great opportunity to accurately assess and refine their operations, creating employee support along the way.

The results of this study should inspire and create a renewed sense of urgency in this critical market sector to tackle Performance Management more intelligently in the public sector..

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Section 2: Best PracticesThe 10 Principles of Good Performance ManagementFor those in the public sector who are looking to learn from this study what can be done to improve Performance Management practices in their own organisations, the study – alongside an extensive review of academic and practitioner literature on performance measurement and Performance Management, and from consultation with a panel of leading academics and practitioners in this field – also identified best practices and from this tested 10 principles of good Performance Management for government and public sector organisations.

We questioned public sector respondents about their Performance Management practices in this light, tested the impact of these principles on organisational success using the latest statistical tools, determined how widespread these approaches are, and how effective they are when used. We found that organisations who have these principles in place are able to:

Create clarity and agreement about the strategic aims.1.

Collect meaningful and relevant performance indicators.2.

Use these indicators to extract relevant insights.3.

Create a positive culture of learning from performance information.4.

Gain cross-organisational buy-in.5.

Align other organisational activities with the strategic aims outlined in the Performance Management system.6.

Keep the strategic objectives and performance indicators fresh and up-to-date.7.

Report and communicate performance information well.8.

Use the appropriate IT infrastructure to support their Performance Management activities.9.

Give people enough time and resources to manage performance strategically.10.

The principles with the strongest individual impact on performance improvement were confirmed to be: (1) creating clarity about the strategy with agreement on intended outcomes, outputs and necessary enablers, and (4) creating a positive culture of learning and improvement (see Figure 6).

Yet, where all 10 principles were found to be in place, the improvement was particularly substantial, confirming that the combined effect is far greater than the sum of the parts.

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1. Achieving Strategic Clarity If an organisation wants to reach its goals, it must first know what those goals are. If the overriding strategy is clear, everyone will be able to pull into the same direction and will be more likely to focus on what matters the most, to produce real results.

Sadly, the public sector has a reputation for lacking this clarity. This is perhaps because of the multiple, often conflicting agendas that arise in political and multi-stakeholder environments. In addition, they often struggle to differentiate between their immediate targets (e.g. getting more police officers onto the street) and the targeted outcomes (e.g. reduced crime levels). A holistic picture of a strategy clearly outlines the overall aims, outcomes, outputs, as well as enablers of performance (see Figure 7).

Often, organisations avoid trying to clarify the strategy (perhaps because this is easiest in a political environment), deliberately

fostering ambiguity about the direction of the organisation and the necessary steps to improved performance. At the same time, they may pay too much attention to specifying output, rather than outcomes and enablers. (They may want to see more police on the street, for example, but have failed to consider in enough detail why they are doing this, and how this might best be achieved.)

To achieve the desired end results, organisations need to stay focused on the ultimate goals, and take into account essential enablers such as the knowledge and skills of employees, the image and reputation of the organisation, the information it holds, the relationships with key stakeholders, the technology infrastructure, as well as the management processes.

Yet, getting bogged down and lost in the theory is all too easy, especially when higher powers are breathing down managers’ necks, looking for documentary evidence and statistics to show that targets are being met.

(1) Achieve Strategic Clarity

(2) Collect Meaningful Performance Indicators

(3) Apply Performance Management Analytics

(4) Create a Positive Learning Culture

(5) Gain Cross-Organisational Buy-in

(6) Ensure Organisational Alignment

(7) Keep the System Fresh

(8) Report and Communicate Performance Well

(9) Implement Appropriate Software

(10) Dedicate Resources and Time

Stre

ngth

of i

mpa

ct

Learning

Better Decision Making

Improved Organisational Performance

The 10 Principles of Good Performance Management and their Impact on PerformanceFigure 6

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Overall Aim

(Mission)

Outcomes (Specific aims that will make an

impact)

Outputs (Specific deliverables the organisation will produce to

achieve its aims)

Enablers (The resources, competencies and core activities necessary to

deliver the outputs and outcomes)

Putting it on Paper

Another problem arises when strategies are extrapolated into lengthy, onerous business plans running to 30 pages or more. People then tend not to read them, perhaps merely picking out the parts that seem relevant to them. Any momentum for change gets lost too, as the detail clouds the overall picture, leading to a loss of clarity.

Experts now recommend that organisations supplement or even replace such cumbersome documents with highly visual plans, or value creation maps, which depict the strategy with all its components on a single piece of paper.

These immediately provide focus and direction, showing at a glance what the intended outcomes are, as well as the core activities and underpinning enablers which will achieve these.

Two examples of strategy mapping templates can be seen in Figure 8, based on the Balanced Scorecard model and the

Value Creation Map (which tends to be more in line with public sector needs).

An example of a local authority strategic map can be found in Figure 9. Evidence shows that those organisations who visually map their strategy into meaningful causal-and-effect maps tend to have a significantly better understanding of strategy, are able to extract more value from their Performance Management system and most importantly, perform better!

Unfortunately, only 10% of public sector organisations were found to create strategic cause-and-effect maps, to visualise the links between different perspectives, while only 4% show the cause-and-effect linkages between their different strategic elements.

This leaves an overwhelming majority of 86% that do not yet draw on this powerful technique. Even if strategy maps are not used explicitly, business plans should contain clear cause-

Components of StrategyFigure 7

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and-effect linkages that show how tomorrow’s outcomes will be impacted upon by today’s outputs, processes and inputs. Using a strategy map in conjunction with a more conventional business plan can help to check the assumptions made in the plan and the map itself is a readily understandable way of communicating the strategy.

Outputs, Inputs and Outcomes

Happily, the value of prioritising focus has not been missed by the public sector – most respondents (68%) agreed that articulating outcomes (the overall goals, for example improving service delivery) was more important than articulating outputs (‘you must hit target X this month’), and that, above all, they needed to understand and clarify the key enablers (94%) if they want to have a real impact on performance.

Encouragingly, 89% acknowledged that intangible elements were often the most important enablers of future performance

in their organisation. The top five enablers or drivers of performance were listed as being:

1. Human capital (skills, knowledge, competencies);

2. Information technology;

3. Stakeholder relationships;

4. Data and information;

5. Reputation and corporate image.

This is all very well in theory, but just how well are organisations putting all of this into practice?

Interestingly, despite the priorities listed above, most organisations were found to articulate their output objectives quite well, while only just over half clearly articulated their outcome objectives (i.e., the real goals that lie behind the targets).

Financial Perspective

Customer Perspective

Internal Processes Perspective

Outcomes/Stakeholder Value Proposition/Output Deliverables

Core Activity Core Activity

Information Capital

Human Capital Organisational Capital

Human Resources

Relational Resources

Structural Resources

Financial Resources

Physical Resources

Strategy Map Value Creation Map

Strategic Mapping TemplateFigure 8

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Meanwhile, less than half of the organisations that took part in the research were found to clearly articulate their enabling objectives (the means by which they would hit their targets), while the most worrying finding of all is that 16% of organisations expressly feel that their objectives are not clearly articulated at all (see Figure 10).

Worringly, this suggests that even though respondents agree that outcomes and enablers are important, many are failing to articulate these elements as part of their strategic plan. And if employees don’t know what they are supposed to be doing, or why, how can they hope to meet the organisation’s targets?

Involving Staff Getting employees to buy into and follow a strategy means engaging them in the process. Yet, when we asked who was engaged in the formulation and definition of the strategy, in 6%

of the organisations we polled not even the chief executive was engaged in the strategy definition! Our interpretation of this worrying discovery is that perhaps other government bodies specify performance goals and targets, and the chief executive feels disengaged from the process.

Further findings added to these concerns, however. Only 89% of directors, 61% of senior managers, a very low 21% of middle managers and a mere 2% of the rest of the employees were found to be engaged in the strategy definition process.

2. Collect Meaningful Performance Indicators

The value of having performance indicators is well documented – these are the benchmarks by which success (and failure) can be measured. Without them, organisations would be stumbling

Value Creation Map for Belfast City CouncilFigure 9

(1.1) Belfast City Council takes a leading role in improving quality of life now and for future generations for the people of Belfast by making the city a better place to live in, work in, invest in and visit.

(2.1) Provide leadership and strategic direction for shaping developing and managing the city.

(2.1) Meet the needs of local people through the Effective Delivery of Quality and Customer-Centric Services.

(3.1) Develop and maintain relationships with key stakeholders.

(3.2) Promote a positive image and reputation.

(3.3) Continuously improve and innovate the service

delivery.

(3.4) Effective communication – internally

and externally.

(3.5) Quality advice- and evidence-based

decision making.

(3.6) Create an open and performance driven culture.

(3.7) Develop our knowledge, skills and

expertise.

(3.8) Ensure happy and dedicated employees

and councillors.

(4.1) Strategic Financial Planning.

(4.2) Strategic Human Resource Management.

(4.3) Strategic Information Management.

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around in the dark, having little idea of whether they were ‘on track’ or not.

Yet, to be of value, performance indicators should help you measure the things that matter the most – and not those that don’t really matter in the great scheme of things. This means indicators need to be tightly and directly linked to the strategic objectives of an organisation.

Unfortunately, this does not seem to be the case among the majority of public sector organisations. Only 15% of the respondents felt that all their indicators were linked to the strategy of their organisation. Even fewer (6%) believed that all their performance indicators were relevant and meaningful – a staggering 92% admitted that many of the indicators they used were not relevant or meaningful.

Part of the problem seems to be the large number of externally imposed indicators. Many organisations seem to make the assumption that these indicators are the only indicators they need to collect, and that the set of externally-dictated measures forms the core of their performance indicators – that is, they are relying too heavily on third parties to tell them how to measure the organisation for success.

Identifying the Right Indicators of Success

Unfortunately, many externally imposed measures and targets are output-focused, and collected for comparative purposes, to benchmark results with other government and public sector organisations. They provide little insight about the unique strategic objectives of individual organisations and they don’t help to measure their unique enablers.

Meeting tactical targets seems to be the main priority for public sector organisations, too, perhaps as a direct result of this – that is, they have become distracted by government targets and are using these as the guide for their overall strategies, instead of their individual core missions as the specific type of organisation they are, in the particular market they serve.

Our research found that the majority of organisations (39%) measure primarily outputs, or a balance between outputs and enablers (29%). Only 23% believe they achieve a balance between measures for outcomes, outputs and enablers (see Figure 11).

Drilling down further (see Figure 12), we found that most organisations would measure perspectives such as people and resources (i.e. whether staff were working hard, or budgets were

being successfully met, rather than, say, whether the public had noticed an improvement in services).

Having already identified that many aren’t necessarily happy with their prioritisation of performance indicators (i.e., that these are not linked to the overall strategy, and are not very meaningful or relevant), 68% also feel they have too many indicators. Only 23% of organisations feel they have the right number of performance indicators while just 8% feel they have too few.

Misleading Targets

The best indicators help organisations to extract meaningful insights and management information that help them to learn, and to improve performance. To be effective, then, these indicators must be supported by clear, realistic and achievable (although also stretching) targets.

Unfortunately, the majority of organisations feel their target-setting process is unclear (82%), while many believe that set targets are unrealistic and unachievable (53%).

As well as being blinded into aligning targets too closely with government box-ticking, organisations are guilty of favouring the collection of data which is easy to collect, over that which would be of most value to collect.

This is partly due to the large number of mandatory indicators, which leaves little or no room for experimentation with and improvement of measurement techniques. But it is also because organisations want an easy life and fool themselves that, if they churn out enough data, and can be seen to be delivering against rigid government metrics, they will keep everyone happy.

But this is not the way to meet higher objectives, such as improving public services, reducing crime, or providing more consistent education for all.

If organisations want to get to grips with performance – and especially with their intangible enablers – they need to allow experimentation with measurement and encourage innovative ways of data collection. Unfortunately, only 8% of organisations feel that their organisations give people the freedom to change or to challenge the measurement methods, while most people feel disengaged from the measurement design and target-setting process.

A further challenge for many organisations is that while they might want to measure the ‘right’ things, they may not be

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Strategic Elements ArticulatedFigure 10

Strategic objectives are not clearly articulated

A number of output objectives are clearly articulated

A number of outcome objectives are clearly articulated

A number of enabling objectives are clearly articulated

16%

75%

54%

44%

Figure 11

Measurement Focus

We mainly measure outcomes

We mainly measure outputs

We mainly measure enablers

We balance our measures between enablers and outputs

We balance our measures between inputs, outputs and outcomes

4%

39%

5%

29%

23%

*Multiple responses possible


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People/human capital related

Resources related (financial, tangible and intangible)

Regulator related

Customer related

Internal processes related

Environmental and social related

Supplier related

98%

76%

68%

57%

52%

48%

33%

Perspectives of Performance MeasuredFigure 12

Alignment with Performance ManagementFigure 13


...our risk management

...our project of programme management

...our budgeting

...our performance reporting 73%

46%

41%

14%

Q: Our Performance Management system is fully aligned and integrated with...


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Strategy Regularly Reviewed and RenewedFigure 14

Q: Our strategic objectives are regularly reviewed and renewed.

Q: Our Performance Management system is regularly reviewed and renewed.

Performance Management System Reviewed and RenewedFigure 15

4%

8%

44%

22%

22%

Strongly Agree (17%)

Agree (48%)

Neither agree nor disagree (22%)

Disagree (12%)

Strongly disagree (1%)

17%

48%

22%

12%

1%

Strongly Agree (8%)

Agree (44%)


Disagree (22%)


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Performance Indicators Reviewed and RenewedFigure 16Q: Our performance indicators are regularly reviewed and renewed.

Appropriateness of Communication FormatsFigure 17Q: The communication format of our current performance information is appropriate and meaningful.

Strongly Agree (5%)

Agree (41%)


Disagree (26%)


Strongly Agree (2%)

Agree (24%)


Disagree (30%)


9%

41%

19%

26%

5%

4%

24%

40%

30%

2%

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able to pin down the data to adequately measure these. Data quality is still an issue in many public sector and government organisations, especially when it comes to some of the non-financial indicators, where they often have to rely on simple surrogate measures.

Around a third of respondents to our survey felt their data quality to be inadequate, while up to a quarter lacked confidence about data quality.

3. Applying Performance Management AnalyticsOnce organisations have collected meaningful data, they must analyse it before they can work out what it means – e.g., how they may need to change things to improve success against key goals.

‘Performance Management analytics’ provide tools and techniques enabling organisations to convert their performance data into relevant information and knowledge. Without it, the whole Performance Management exercise is of little or no value to the organisation.

Yet many organisations seem to spend the majority of their time and effort on collecting and reporting data and not enough time on extracting valuable and actionable insights from it. More than half of our respondents (59%) believe that their organisation does not have sufficient capabilities to comprehensively analyse performance data, while as many as 87% feel that their analysis capabilities need to be improved.

The difference between good and bad information is determined by how well it supports critical decision-making. Sadly, we found that the majority of organisations feel that their performance data does not support effective decision-making. Either the data is too operational or the analysis is not being taken to a strategic level, with the largest proportion (36%) disagreeing with the statement ‘Our performance indicators help us to make better strategic decisions’, and a further 3% strongly disagreeing.

4. Creating a Positive Learning CultureAssuming public sector organisations get their Performance Management strategy right, and put the right metrics in place to assess this, they then need to have a strategy in place which determines how they will apply their findings to improve performance on an ongoing basis.

Performance information can be used for different purposes – good and bad. It can be used to blame or punish people, or it can be used to empower people and enable self-management.

There is mounting evidence to show that the command-and-control approach yields the least performance benefits and instead leads to dysfunctional and self-serving behaviour, manipulation and cheating.

As a result, many experts now agree that the best environment for Performance Management should be learning. In a positive learning culture, performance data is discussed openly and honestly and used by everybody to make better-informed decisions, and to take actions that positively affect future performance.

While as many as 83% of our respondents claimed they placed a strong emphasis on learning from performance information, some underpinning data calls this figure into question.

All too often, organisations ‘juggle’ their Performance Management data. Alarmingly, 68% of our respondents admitted that this practice was going on in their organisations.

So what’s going on?

Influencing Behaviour

Further analysis found that the majority of organisations feel their directors and senior managers guide employees’ behaviour by using performance indicators to monitor the implementation of objectives (providing feedback on the achievement of set goals to control and correct unwanted variance). This practice, known as ‘diagnostic control’, is now seen as inappropriate for modern organisations, because of the negative impact it has on morale and motivation.

The second most frequently used approach was using performance results to prescribe overall strategic purpose, vision and values. This is less directive and instead focuses on creating an understanding of strategic intent.

The least used approach saw directors and senior managers involve themselves regularly and personally in the decision activities (drawing attention to current strategic issues).

Experts currently favour an approach that draws on a combination of the last two practices – where top management sets the direction, and then influences direction through personal interaction with people.

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Another factor found to determine success is the extent to which top management focuses on controlling output, input or behaviour.

Again, research has shown that controlling people’s behaviour in a top-down manner (where the emphasis is on compliance with articulated operating procedures) yields the least benefits. The problems here are not only the huge costs involved in surveillance and control, but the fact that this does not allow for discretion and leads to rigid and often dysfunctional behaviour.

If it is the output (versus targets) that is being emphasised, this gives subordinates a bit more discretion in how they achieve the desired ends. But, while output control makes sense where there is no cause-and-effect knowledge, it can lead to an over emphasis on short-term targets (such as financial performance) to the detriment of longer-term objectives.

Input control, on the other hand, focuses on the contributors to performance. This can be a highly effective approach, so long as the causal links are known – e.g., if we assign more staff to service X, customers will see a marked improvement in service. Without these causal links, there is a danger that the wrong performance drivers might be managed.

Taking the Middle GroundBest practice specifies that public sector and government organisations should have a clear understanding of cause-and-effect, and should then use a healthy mix of input and output controls to mange their organisation.

Currently, this is not the case for the majority of public sector organisations. Our research shows that the majority of respondents feel that their directors and senior managers focus primarily on output (performance against short-term, tactical targets), followed by a focus on behavioural control, and lastly a focus on input (for example, ensuring employees have the right training, knowledge, skills, abilities and values).

In a positive learning culture, organisations proactively provide performance information and ‘contextualised’ feedback to everyone in the organisation, with a special emphasis on middle management and front-line staff. Unfortunately, the majority of those in our survey short-sightedly reserve this information for senior management and external stakeholders.

5. Gaining Cross-Organisational Buy-InIf everyone knows what they are aiming for, and why, they are much more likely to get there. Yet it is surprising how many

organisations choose not to share this information with their workforce!

Clearly, top-level buy-in is essential, if an effective Performance Management strategy is to be designed and implemented. Buy-in from middle managers and front-line staff is essential too, though – to make Performance Management an integral part of the organisation’s daily routines.

If middle managers and front-line staff are not provided with meaningful performance feedback, and instead feel treated like robots that just have to perform prescribed tasks or collect and report seemingly meaningless data, they are unlikely to ever buy into the Performance Management approach.

Our findings confirm that the level of acceptance, use and awareness declines the further down the organisational hierarchy the employees are. This supports findings from other studies – that the highest levels of acceptance are generally found among chief executive and directors. The comparative low level of Performance Management awareness among middle managers and front-line staff is very worrying – a considerable number aren’t even aware of the Performance Management system.

If tangible improvements in strategy-based performance are ever to emerge, public sector organisations need to turn this situation around as a matter of urgency.

6. Ensuring Organisational AlignmentWhen organisations lose sight of what they should be managing and why, they waste a great deal of time and resources producing something which is of little value internally, while potentially demotivating staff.

With this in mind, a Strategic Performance Management system should be used to guide and align other organisational processes – such as budgeting, performance reporting, the management of projects and programmes and the management of risks.

All too often, however, government and public sector organisations are found to be running their reporting, risk management, project management and budgeting processes in parallel – as though these are completely unrelated activities!

Given that risks are the flipside of performance, organisations that fail to marry their systems and practices are missing something important.

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According to our research, alignment is still a major problem in public sector and government organisations. While 73% have aligned their performance reporting, less than half have aligned their budgeting and project and programme management, and just 14% believe their risk management is fully aligned with their Performance Management system.

Not linking and aligning Performance Management with other management processes can severely reduce its benefits. It makes sense to use the Strategic Performance Management system to guide and align other organisational processes – such as budgeting, performance reporting, the management of projects and programmes and the management of risks.

In many government and public sector organisations, however, such processes are run in parallel to their Strategic Performance Management approaches. However, if your Performance Management process has delivered a clear strategy, it would make sense to also use this to create and manage budgets, coordinate and manage projects and programmes, and to report on performance.

Furthermore, risks are basically the flipside of performance. Performance indicators allow organisations to understand whether they are delivering the designated performance levels, whereas risk indicators allow organisations to understand the risks of not being able to deliver performance. These should therefore be closely aligned.

Unfortunately, our research shows that alignment is still a major problem in public sector and government organisations; 73% have aligned their performance reporting, while less than half have aligned their budgeting and project and programme management. Only 14% of organisations believe their risk management is fully aligned with their Performance Management system (see Figure 13).

7. Keeping the System FreshAnother critical success factor in effective Performance Management is keeping the practice up to date, so that the measures being tracked are as relevant today and tomorrow as they were when the system was first devised. As the organisation’s strategy and goals are developed and refined, so too must the Performance Management strategy be flexible.

Organisations that build up huge legacy systems of performance indicators aren’t doing themselves any favours. It’s all very well to keep adding new indicators, but if you don’t delete the outdated measures, reporting becomes confused and so

overwhelming that decision-makers can’t see the woods for the trees.

Encouragingly, most government and public sector organisations appear to regularly review and renew their strategy, typically following an annual planning cycle. Accordingly, we find that respondents feel that their performance management system and their performance indicators are regularly reviewed and renewed (see Figures 15 and 16).

8. Reporting and Communicating Performance Information Appropriately

So, once performance has been measured, what should organisations do with this hopefully valuable information?

Reporting and communicating performance information is a vital part of any effective Performance Management strategy. There’s no point having rich findings if the relevant people don’t know about them so they can hone the way they go about their jobs in the future.

This means organisations must disseminate appropriately communicated performance results, and what these mean to the organisation and to individual departments, teams and individuals. Staff members must be able to understand the ‘so what’ implications for their own roles in the organisation, e.g., ‘How does this affect me?’ and ‘What do I/we need to do differently in future?’.

For this to take place, performance information must be reported and communicated appropriately. Any data has to be put in context and presented in a form that is accessible, such as in tables with traffic lighting, graphs or charts.

When it comes to performance data, there is often little contextualisation or interpretation, with the result that the key messages are unclear, often buried in data. All too often, performance data is circulated in the form of large spreadsheets, attached to emails or hosted on the intranet, leaving individuals to figure out the key messages.

Yet, research has shown that it is important to communicate performance data in different formats to reach different people with different preferences. Current best practice involves making extensive use of visual aids (such as strategic maps, graphs and charts) supported by numerical information, and using narratives and verbal communication formats to complement, contextualise and provide meaningful interpretation.

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Where data and league tables are presented without context or interpretation, individuals may misunderstand the data, creating the potential for misuse. In a political context, there will always be the temptation to ‘spin’ data for self-serving purposes, and the more contextualised the data is, the more difficult this will become.

In our study, we found that the primary communication format is numeric, using tables and spreadsheets complemented by graphs and charts. This was followed by pure numeric without the graphs and charts. The least common formats were narratives with supporting numeric data, and verbal communications of performance information.

We would argue that organisations should place much more emphasis on communicating performance information in words, both written and verbal, and less in numbers. After all, the underlying messages and insights the numbers generate are what really count.

Those taking part in our survey clearly agree, since the majority claim to be unhappy with their current communication format. Over a third feel that this is not appropriate or meaningful (see Figure 17).

9. Implementing Appropriate SoftwareAlthough Performance Management is not about software, having the right software in place and using it appropriately can make a substantial difference.

As with any attempt at automation, there is always a real danger that it ‘dumbs down’ the power of Performance Management and that organisations that rely on this too heavily risk letting the software do the thinking. The other real danger is that the whole initiative now becomes an IT project, instead of a management priority.

Performance Management software is clearly not the magic pill that will sort out all of the Performance Management problems. Indeed, all too often government and public sector organisations are seen to implement software only to find that, once the initial excitement had worn off, they are left with a costly IT system and a slow realisation that Performance Management is not about technology but the people and their processes.

These considerations aside, we believe that no organisation-wide Performance Management system can work without the appropriate support of specialised Performance Management

software. The variables are too complex, the margin for error too risky.

The right Performance Management software applications allow companies to integrate the data, communicate performance appropriately and allow performance to be analysed by everyone, and have been shown by multiple research studies to have a strong, tangible impact on organisations’ delivery against strategic business goals.

Spreadsheets were not designed for this purpose and have many severe shortcomings when it comes to data analysis, communication and scalability. Not surprisingly, the majority of spreadsheet users report being unhappy with their Performance Management capabilities. By contrast, users of specialised packaged applications are generally the happiest.

Our survey confirmed this. Over half of organisations still rely on spreadsheet applications, while 23% use specialised packaged applications and 22% use custom-build applications. At the same time, we found that users of packaged applications were significantly happier with the way their software supports Performance Management in their organisation, followed by custom-build applications and, last of all, spreadsheets (see Figure 18).

Packaged software, broadly used across the organisation, also has the bonus effect of drawing more people into the process, engaging everyone in the process of managing and measuring performance.

Figure 19 indicates that users of packaged applications are again significantly happier with the way their software helps to engage people in the Performance Management activities.

10. Dedicating Resources and TimeLast, but by no means least, Performance Management will only have the desired impact if organisations take it seriously as a discipline, and devote adequate time and resources to it.

Processes need to be embedded into the organisation, measures need to be collected, analysed and reported, people have to be trained, cascading the system into the organisation requires support, meetings have to take place to discuss performance, the IT system has to be maintained, and the system has to be kept fresh and updated. All of this requires time and resources, both of which tend to be in short supply in any organisation.

Current best practice proposes creating a dedicated team with resources and time to perform the role of facilitating the

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Performance Management activities. This team then performs the tasks such as facilitating the strategy design and mapping process, designing and reviewing performance indicators, collecting and analysing performance data, reporting performance, facilitating the cascade and the performance review processes, maintaining the Performance Management software system as well as training people in the Performance Management process.

This is a broad remit and requires a permanent, cross-functional team.

Interestingly, most of the government and public sector organisations in our study already have dedicated people in

place to do this. Job titles such as ‘director of performance’, ‘performance officer’, or ‘performance analyst’ are nowadays commonplace in the public sector.

Yet, even with these people in position, respondents to our survey point to a need for more resources, capabilities and a wider remit. While 82% of organisations had a dedicated person (part- or full-time) who was in charge of Performance Management, 73% felt their remit was too narrow, 87% claimed their analysis capabilities needed to be improved, and 85% believed they required more resources and a larger team.

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Value of Software Applications

Figure 18a: Packaged Applications

Figure 18b: Custom Build

Q: The software application(s) we use for Performance Management help(s) us to better manage our performance.


Agree (65%)


Disagree (1%)


1%

20%

65%

13%

1%

Strongly Agree (8%)

Agree (50%)


Disagree (14%)


1%

50% 27%

14%8%

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Figure 18c: Spreadsheets

Strongly Agree (2%)

Agree (27%)


Disagree (17%)


17%

47%

27%

6%2%

Figure 19a: Packaged Applications

Q: The software application(s) we use for Performance Management help(s) us to better engage everyone in the process of managing and measuring performance.


Agree (66%)


Disagree (1%)


66%

23%10%

1%

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Figure 19b: Custom Build

Strongly Agree (6%)

Agree (39%)


Disagree (19%)


3%

6%

39%

32%

19%

Figure 19b: Spreadsheets

Strongly Agree (0%)

Agree (10%)


Disagree (29%)


16%

29%45%

10%

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ConclusionsWhile effective Performance Management is a major challenge facing any organisation, whether commercial or public, this survey leaves us in no doubt that the government and public sector, with all of the targets under which it must operate, is becoming lost in the sea of measurement data it is generating.

Approached properly, Strategic Performance Management can have a big impact on improving organisational performance. This finding sits well in a climate where governments around the world take Performance Management very seriously.

Yet, while the practice exists and is fast churning out data, it is the way Performance Management is handled and directed that makes the biggest difference between top-performing and failing organisations. Those who indulge in the practice merely to keep external moderators off their backs are missing out on a great opportunity to intelligently and accurately assess and refine their operations, creating employee support along the way.

We hope that this research, and specifically the 10 principles of good Performance Management we have defined and tested, will be used as a blueprint to improve the Performance Management practices in government and public sector organisations around the world, as they strive to address some of the most pressing challenges they have ever known.

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About the AuthorBernard Marr is one of the world’s leading experts on Strategic Performance Management and has advised many leading private companies, public sector organisations and governments across North America, Europe, Africa, the Middle East and Asia.

He has also held influential positions at the Judge Institute of Management Studies at the University of Cambridge, and the renowned Cranfield School of Management where he was a member of faculty for almost 10 years before taking on his current role as Chief Executive and Director of Research at API.

Marr is an acclaimed keynote speaker, consultant, teacher, and award-winning writer, having contributed to over 200 books, reports, and articles on topics such as Corporate Performance Management, Balanced Scorecard, Strategy Maps, and Intangible Assets. He is a best-selling author of Strategic Performance Management, Perspectives on Intellectual Capital, Weighing the Options: BSC Software, and Automating your Scorecard.

He can be contacted at [email protected].

About the Advanced Performance InstituteThe Advanced Performance Institute (API) is the world’s leading independent research and advisory organisation specialising in organisational performance. The institute provides expert knowledge, research, consulting and training on concepts like Balanced Scorecards, Performance Measurement and Corporate Performance Management.

The aim of the API is to provide today’s performance-focused companies, governments and not-for-profit organisations with insights, advice and services that help them deliver lasting change and superior performance.

The API is headquartered in the UK and operates across Europe, the United States, the Middle East and Australasia. The institute was established in the mid 1990s and has continuously grown to its current leading position where its employees, fellows and associates provide research, consulting and training services to customers and clients across the globe. For more information please visit: www.ap-institute.com.

About CIPFA Performance Improvement NetworkThe Chartered Institute of Public Finance and Accountancy (CIPFA) is one of the leading professional accountancy bodies in the United Kingdom and the only one that specialises in the public services. It is responsible for the education and training of professional accountants and for their regulation through the setting and monitoring of professional standards. Uniquely among the professional accountancy bodies in the UK, CIPFA has responsibility for setting accounting standards for a significant part of the economy, namely local government. CIPFA’s members work in public service bodies, in the national audit agencies and major accountancy firms. They are respected throughout the UK for their high technical and ethical standards and professional integrity.

The CIPFA Performance Improvement Network is a subscription based network of public sector organisations who work together, in workshops and documented reports, in the areas of Performance Management, business process improvement and related areas to identify practical ways to improve local public services.

About ActuateActuate Corporation is dedicated to increasing the richness, interactivity and effectiveness of enterprise data, for everyone, everywhere. Actuate delivers the next generation RIA-ready information platform for both customer and employee-facing applications. Global 9000 organisations use Actuate to roll out RIA-enabled customer loyalty and Performance Management applications that improve customer satisfaction and employee productivity. The company has over 4,200 customers globally in a diverse range of business areas including financial services and the public sector, many of which have a long history of deploying Actuate-based solutions for dozens, or even hundreds of their mission-critical applications.

Founded in 1993, Actuate has headquarters in San Mateo, California, with offices worldwide. Actuate is listed on NASDAQ under the symbol ACTU. For more information on Actuate, visit the company’s web site at www.actuate.com.

References and Further ReadingAdvanced Performance Institute web site: www.ap-institute.com

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