18 April 2008
Public sector organisations around the world are endlessly number-crunching their performance targets. But to what purpose? Bernard Marr spells out the ABCs of good – and bad – practice
Performance management is high on the agenda of governments across the globe. US President George Bush has taken it on board; Canadian government departments are committed to it; and over the past decade the British public sector has been subjected to a range of performance assessments designed to improve both services and accountability.
But does it actually work? The aim might be to help public sector organisations improve but research shows that, unless performance management is implemented well, it can actually lead to decreasing performance, with perverse and dysfunctional behaviour, such as target fixation and cheating.
And these problems are worst in the UK, according to a comprehensive global study of government and public sector performance management, carried out by the Advanced Performance Institute, in collaboration with CIPFA and Actuate Corporation.
Even before our study, there was anecdotal evidence to show that the execution of performance management initiatives was often so mechanistic and number-focused that it prevented organisations from achieving the desired improvements. It could even lead to unintended behaviour. In particular, the API observed an increasing obsession with collecting and reporting performance data by its public sector clients.
Whole teams and departments were being created with new job titles such as 'performance manager' and 'performance analyst' – individuals who shed blood, sweat and tears to put performance management systems in place. Unfortunately, the results of these efforts were all too often simply an increased administrative measurement burden, rarely producing new management insight, learning or performance improvement.
Even worse, poor performance management practices have led to counter-productive behaviour, such as hospitals, schools and police forces manipulating targets, while overall service suffers.
Typical performance management practice in UK public sector organisations can be described in what we have termed the ICE approach:
Identify everything that is easy to measure and count
Collect and report the data on everything that is easy to measure and count
End up scratching your head, thinking 'What the heck are we going to do with all this performance data?'
The mushrooming of performance management initiatives in the public sector, combined with the increasing anecdotal evidence that they weren't working as they should in practice, prompted our research project: Strategic performance management in government and public sector organisations – a global survey. The aim was not just to understand the current state of affairs, but also to glean information on the factors that contribute to success, enabling us to provide a best-practice blueprint for organisations that use performance management.
Our findings confirmed our worst fears – more than 70% of the 336 UK participants admitted that people in their organisations occasionally fabricated performance data. No wonder people don't trust official government statistics. This was higher than the numbers reported in the US, Canada and Australia – the other participating countries.
The survey also found there were too many performance indicators and a lack of a clear strategic direction. Performance management should provide the strategic direction for everyone in the organisation, and the performance measures should be used to check whether the strategic journey is on track or not.
In addition, there was a skills gap in performance management analytics. Organisations are drowning in data but thirsting for information. New performance management and measurement routines are providing organisations with large amounts of data – yet, if the data are not aligned with the strategy, or if the right analysis skills are missing, organisations will remain data-rich but information-poor.
It isn't all doom and gloom, however. While there clearly are problems, we found that performance management can have a significant and positive impact on performance improvement, as long as it is implemented properly.
The only reason any organisation would want to manage performance is to improve it. But this does not happen automatically. The right information has to be collected and used to inform learning and decision-making, which in turn should lead to performance improvements. As part of our research, we identified and tested ten principles of good performance management.
Encouragingly, we found that organisations that followed these principles clearly outperformed the other public sector organisations. Here are five of them in more detail.
The first is to create clarity and agreement about the strategic aims. If any public sector organisation wants to reach its goals, it must first know what they are, so everyone can pull in the same direction. 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, organisations often struggle to differentiate between their immediate targets, such as getting more police officers on to the street; the enabling actions, such as recruitment and providing the right training and skills; and the targeted outcomes, such as reduced crime levels. A holistic picture of a strategy clearly outlines the overall aims, outcomes, outputs and enablers of performance. Yet we found that less than half of the UK public sector organisations clearly articulated how they would hit their targets.
Belfast City Council and the National Lottery Commission were among the exceptions, setting out their strategic aims in the form of value-creation maps that outline the different strategic objectives (enablers, outputs and outcomes) on a single piece of paper.
The second principle is to collect meaningful and relevant performance indicators. To be of value, performance indicators should help organisations measure the things that matter the most (ie, those that are directly linked to the strategic objectives) – not merely those that are easy to measure. Sadly, only 15% of the respondents felt they were doing this, with a staggering 92% admitting that many of the indicators they used were neither relevant nor meaningful.
Among the exceptions were the Royal Air Force and the Scottish Executive, both of which have applied Key Performance Questions to ensure every performance indicator directly helps to answer management questions, which are tightly linked back to the strategic objectives.
Thirdly, the indicators need to be used to extract relevant insights. Once organisations have collected meaningful information, they must analyse it before they can work out what it means. For example, they might need to change things to improve their success against major goals. Yet many organisations seem to spend the majority of their time and effort collecting and reporting information, and not enough time extracting valuable and actionable insights from it – 87% of respondents felt their analysis capabilities needed to be improved.
Among the exceptions was the Ministry of Defence, which now has dedicated performance analyst teams. Their role is not only to collect and report data, but also to extract insights, guided by the main performance questions and supported by performance management analytics.
Once organisations have got their data sorted, they will need to create a positive culture of learning from it. The information can be used in different ways – good and bad. It can be used for additional top-down control and to blame or punish people, or to empower people and enable self-management.
Many experts now agree that the best environment for performance management should be learning. Here, the data are discussed openly and honestly and used by everybody to make better-informed decisions, and take actions that positively affect future performance.
South Oxfordshire District Council and West Mercia Constabulary are good examples of how to create a positive learning culture. They have both been successful in creating environments where performance is discussed openly and without fear or blame.
The final step is to align other organisational activities with the performance management system. As well as being tied in with the strategic aims and priorities, performance management should be used to guide other organisational processes – such as budgeting, performance reporting, the management of projects and programmes and the management of risks. Yet, while 73% of those in our survey had aligned their performance reporting, less than half have aligned their budgeting and project and programme management, and just 14% had fully aligned risk management with their performance management system.
One exception was the Royal Air Force, which has achieved complete integration of performance and risk management. The management of performance is seen as the flipside of risk management, which looks at the possibilities of not meeting strategic objectives.
Overall, the survey leaves us in no doubt that the UK government and public sector, with all the targets under which it must operate, is becoming lost in the sea of measurement data it is generating. Approached properly, strategic performance management should and can have a big impact on improving organisational performance. We hope that this research, and specifically the ten principles or best practices we have defined and tested, will be used as a blueprint to improve practices in government and public sector organisations in the UK, as they strive to address some of the most pressing challenges they have ever known.
Bernard Marr is chief executive and director of research at the Advanced Performance Institute. The full results of this study will soon be available on the API and Actuate websites and through CIPFA's Performance Improvement Network. www.ap-institute.com
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