performance management system (PMS)
I work in one of the largest, important and efficient organization of my country. Since its inception, the destination statement of my organization had been revenue collection, and we as managers, have never failed to achieve our targets. However, in year 2004, consequent to the pressure from the leadership and the business community, the revenue board decided to reform itself in accordance with modern best practices. Consequently, I attended numerous workshops, trainings and seminars on the reform process, but I never understood the rationale behind all this reformation, primarily because I always thought that our performance as managers had always been remarkable.
So the first question that naturally comes to mind in context of this back ground is if we really need a performance management system in a huge and efficient Government organization like ours. The answer to the question is provided by Zoe Radnor and Mary McGuire in their article “Performance Management in the Public sector-Fact or Fiction” International Journal of Productivity and Performance Management, Vol 53, No 3, 2004, pp 245-260:
In articulating the need for PMS to be used in order to modernize the Government Services, the Audit Commission of UK (1999) emphasises two main reasons, namely, the need:
i) to improve public services i.e.(through increased economy, efficiency and effectiveness in service delivery) and
ii) to reinforce accountability, so that organizations are clearly held to account for the resources they use and the outcomes achieved.
Having said that, the confusion in this regard is still common as appreciated by Lebas (1995), mentioned in Radnor, Z & Maguire, M article “Performance Management in the Public sector-Fact or Fiction” International Journal of Productivity and Performance Management, Vol 53, No 3, 2004, pp 245-260. It clarifies that performance measurement includes measures based on key success factors, like input, output, past achievements and future potential, while Performance management includes training, teamwork, dialogue, management styles, shared vision, employee involvement, incentives like rewards etc.
So what is Performance Management? Armstrong (2000) defines performance management as a “strategic and integrated process that delivers sustained success to organisations by improving the performance of people who work in them and by developing the capabilities of individual contributors and teams”. Indeed, according to Moullin (2002) and de Bruijn (2001), the objectives of performance management at the heart of the government reform agenda are:
* rationalization, in terms of size, cost and functions;
* the introduction of more effective systems of financial accountability;
* greater transparency in the operation of these public institutions;
* the upgrading of the skills base of the sector and the modernization of its functional principles, procedures and systems; and
* the development of a realistic remuneration policy based on performance
Traditionally performance was only measured in terms of financial and accountable gains or losses. However Kaplan & Norton in 1992 changed this concept in view of the emerging global trends. They realized the need to link financial and non-financial measures of performance and identifying key performance measures, which led to the emergence of “Balanced Score Card” approach. It is defined as “a management framework that, translates an organization’s mission and strategy into a comprehensive set of performance measures that provides the framework for a strategic measurement and management system “Balanced Scorecard” (Kaplan & Norton, 1996)”.
How would I implement a strategic performance management system in my organization?
Clearly devise and articulate the organization’s vision and strategy;
This is one of the two most important issues which need to be addressed while trying to implement a Balanced Scorecard in a Government organization. It is to be devised in a manner keeping in view the fact that success of a Government organization cannot be merely judged through financial gains. It involves a lot of stake holders and creating public value is its primary objective. So the development and agreement to a rationale Destination Statement is the base and on it depends the whole façade of a balanced scorecard.
Clearly explain the idea of a Performance Management System to all
This is the second pre-requisite and would include my superiors, colleagues and subordinates, and what we can achieve through its implementation. I say so because there is definitive possibility that it might be mistaken for a performance measuring system and hence it’s actual importance is not realized at all. As Kaplan & Norton have remarked in their book “Balanced Scorecard” HBS Pres 1996s, pp 272: “The difference between a measurement and a management system is subtle but crucial.”
In this context, I would take the following steps in order to implement a balanced scorecard in my organization,
Implementing the management system in small chunks
As the destination statement of my organization would be a fairly large document due to its wide array of functions, it is unlikely that all aspects of the statement will be subject to immediate action. However the two primary areas would be collecting optimum revenues and maximum taxpayer’s facilitation.
Communication of the vision and strategy to the middle managers
This is very important because the vision and strategy normally stays with the top management in our organization. To successfully achieve the goals it is vitally important to communicate it to the mid level managers, so that they can not only align themselves with the requirements of future but also communicate the vision effectively downstream. It would also help them to align their personal goals and targets with the organization’s vision.
Identification of the key performance indicators
The next step would be to identify the KPI (key performance indicators) that best link the organization’s vision and strategy to its results. Defining them would show how my organization creates value for each key stakeholder by showing clear cause-and-effect relationships between strategic objectives. To develop them, I would follow the model as proposed by Aaron A. Estis & Peat Marwick, Paper presented at the 1998 Conference of the Association for Public Policy Analysis and Management -(The Balanced Scorecard – Applying a Private Sector Technique to the Public Sector).
This model public sector balanced scorecard includes the following four perspectives:
* Operational efficiency
* Mission accomplishment
* Organizational learning
The only difference between the private sector and the public sector balanced scorecard is that the public sector approach includes the mission accomplishment perspective and does not include the internal perspective. The change reflects that fact that a public agency’s mission is often unrelated to financial success or meeting customer needs as is the case with private organizations. My key indicators would be:
• Mission Accomplishment
o Optimum Revenue Collection
o Responsible usage of budgets (public money)
o No lagging or laxity or carelessness in expenditure
• Customer / Taxpayer
o No complaints of corruption
o Simplification of tax laws & procedures
o Taxpayer voluntary compliance
• Operational Efficiency
o Simplification of laws
o Maximum use of IT systems
o Minimum contacts with customers
o Speedy responses to taxpayer queries
• Organizational Learning & Growth
o Staff development and training
o Performance incentives like financial rewards
o Merit based Promotions
Establishing objectives that support the organization’s vision and strategy;
Next I would like to think about what my organisation needs to do next in the next year to 18 months, if it is to achieve the outcomes described in the Destination Statement. I would summarize these in the form of a set of priority Strategic Activity Objectives. So these objectives would be something like this
* Enhancing taxpayer facilitation through giving a modern outlook to the organization. Riddance from the outdated bureaucratic system (tax payer friendliness)
* Announcing financial incentives for better workers coupled with zero tolerance on incidents of corruption
* Improving infrastructure, and making use of some top of the line IT systems specially designed and suited to my organization for tax payers queries and database maintenance
* Keeping strict vigil of the primary objective i.e. revenue collection
Linking objectives in a strategic linkage model and develop effective measures and meaningful standards;
By now I should be able to show how the activity objectives will link to the delivery of the outcome objectives. For that I need to do the following to have the feel for whether these activities are moving the organisation in the right direction – towards achieving the Destination Statement.
Allocation of resources and taking action
Once the objectives are set, then appropriate budgeting of the concerned departments is necessary step enabling them to start taking actions towards achieving those strategic objectives. (Improving infra-structure)
Ensuring proper communication to the employees; cascading the scorecard
The next very important step is to communicate the objectives and the measures to the employees and monitoring and motivating them towards a wide acceptance of the measures; it would be really important to try to align their goals with the overall strategy and facilitating their personal development through trainings, seminars and symposiums as part of the process.
Training would be provided to appropriate personnel to help them properly make process improvements
Monitor performance by creating appropriate review system
Using the Balanced Scorecard promotes more objective and analytical discussions based on a shared view of what needs to be done: it provides factual information about what is happening, enabling management teams to become more efficient and effective at implementing strategy. So the best way to use this PMS is to agree to review it on a regular basis.
Establish a reward and recognition system to foster performance improvements:
Organisations should try to tie any reward and recognition system to performance improvement as measured by the organizational BSC.
Collect and analyze performance data and compare actual results with desired performance;
That would be the final part of my PMS. I would collect the relevant data and then would compare it with the desired results. This would not only help me track progress but would also provide me with the opportunity to make appropriate amendments in my KPI as well as strategic objectives. This would be kind of my review of what I had developed and to measure the efficacy of it.
Barriers to the implementation of Performance Management System
Implementing a balanced scorecard is not a piece of cake. As Wholey, Director of US General Accounting Office cited in Aristigueta, 1999, p.5 states “there are a host of political, bureaucratic, conceptual and technical problems in implementing such a regime of extensive PIs for different public services.
Kaplan & Norton in their book “Balanced Scorecard” HBS Pres 1996s, pp 285 have categorized the barriers to successful implementation as “Structural” and “Organizational” defects.
Structural defects are easier to remedy because it occurs because of a lack of understanding of the Scorecard, but they do not provide guidance nor provide basis for resource allocation, strategic initiatives and linkage to important budgetary spending.
Organizational defects in implementation of a scorecard are manifested in the following manner which is quite true for my organization as well:
Taking Performance Management as a confused term is the biggest barrier. We may have general agreement about what performance management is but as soon as we interact with people in my workplace, we may find that there are dozens of ideas about it in practice. Very few people would have an understanding of performance management as the entire process. Regardless of what I say, a person’s ideas about performance management are formed on the job, through personal experience. This can create a severe implementation problem. This is exactly the situation I was in when the reform process in my organization started.
Employees can view PMS as a new punishment tool acquired by the top management, because in our organization there is a general agreement among employees that all modern management theories revolve around job cuts, unnecessary accountability and hence would be used by the top management to accomplish these two designs.
Scorecard development is left to middle management because either the top management would be too busy in doing the “big things” or would not give it the right emphasis because they may get under the impression that what we can do with the PMS can not be measured, and in a revenue collecting organization, any performance that cant be measured is not a performance.
No intellectual commitment & coaching from the top management may ruin the whole thing. Management might use this tool as performance measurement, and instead of using it as a management system for the whole organization, they might restrict its efficacy to fulfilling short term targets and goals. Furthermore, apart from showing commitment to the new system, executives need to shepherd the process. They must coach their subordinates so that level of management can continue the cascading process. So, apart from championing the process, executives must teach, demonstrate, require, monitor, and commit to it
Poor communication about Performance management system could become another important barrier to successful implementation in my organization. PMS is, above all else, about communicating. Communicate effectively with employees during the entire performance management process that’s from goal setting to appraisals, and performance is likely to improve, and problems to be reduced. Communicate poorly and the opposite happens. I might consider this the biggest challenge in our old colonial style bureaucratic system.
Not taking the employees on board would also be a big issue in our organization because the employees are normally entirely ignored in such activities and processes except for token involvement. If performance management system improvement does not include executives, managers, the human resources department, and employees, it is likely to fail. All must have input into the process, and usually, all must redevelop their understanding of the purpose and benefits of the process.
Internal politics or organizational gaming can act as a big barrier, considering the size of the organization and different groupings. I can easily quote an example of implementing a Post Clearance Audit system in my organization where vested interests politicized and negated the hard work of the project team. Similarly, as a balanced scorecard generally involves the development of strategic goals and subsequent measures, opposing groups may cause developments of plans that are not achievable.
Culture of Insolence is also prevalent in my organization; the well entrenched bureaucracy is used to see every bit of change with suspicion and to the extent of mocking and ridiculing it. So implementation of a PMS can also be viewed as an unnecessary intellectual exercise, waste of money and of no good use.
Resistance to Change is also a big barrier. In case of my organization, it directly conflicts with the old power hungry bureaucratic system, which believes in making connections and gaining personal benefits, and where simplification of laws, rules and procedures and taxpayer friendliness might be seen as a dent in powers.
Technological & Financial Constraints can also threaten the whole process as the top management needs to be convinced to get approval of the huge financial support for acquiring an IT system, conducting courses for staff training and skills development.
How to overcome the barriers to implementation of a Performance Management System
The key approach to overcome the above is to implement a systematic and structured improvement process to underpin the measurement system.
Setting the context right
There are two ways to set context, both of which are necessary. The first is to integrate performance measures with the long-term goals of the organization. We should focus on the taxpayer’s desired future–a vision–and then determine progress toward the vision. Program performance must affect the quality of service for the taxpayers, if only indirectly. Any performance measurement system that doesn’t include outcomes measures for clients, will inform decision makers that they are doing the work right, not that they are doing the right work. The clientele of my organization is no longer satisfied with information about how much revenue was collected or how the public money was spent. They only want the revenue board to work in lines with modern best practices as in the developed countries, so that they can compete globally. This should be our goal to understand what is expected of us and why, rather than bemoaning about the powerful past.
Commitment from Leaders
If leaders in my organization are not committed to using performance data, then establishing that commitment before moving forward is a must. Lasting change cannot be accomplished simply by top-down orders; such change requires engagement and commitment from employees, stakeholders, and customers. Establishing and using a performance management system is difficult and takes time. Without leadership, resistance will overcome the best intentions. Management has an obligation to communicate its intentions and reasons for implementing such a system.
Development of Capacity
Employees must have the capacity to develop measures, or they will use whatever “measures” are already available. Again, senior management must build capacity by first assisting departments in identifying goals, mission, and desired outcomes, and secondly help them devise measures that they believe will provide the proper feedback to indicate performance. Finally, they should help managers and employees enhance their ability to use the information to improve performance continuously.
Focus on improvement and reward instead of punishment
If measurement focuses on negative accountability, managers and employees will seek to avoid accountability when things go wrong, as it normally happens in my organization. But if measurement is seen as a tool for improvement and fear is driven out, creative tension–the gap between today’s performance and the vision–can work its magic. In considering outcomes for a program, we need to take some time to identify the major outside forces that affect the desired outcomes. This will be a helpful task, both for determining the best strategies or approaches to implement and for observing and examining actual performance.
When designing any system, the designers must know what the information will be used for and who the audience is. All information is produced for some reason. A performance measurement system should provide information to policymakers and managers so they can make better decisions. If the stakeholders who are supposed to use the data to make decisions don’t read, use or don’t understand the system, then it is bound to fail. The involvement of stakeholders in identifying outcomes also raises the awareness that government cannot achieve most outcomes by acting alone; success requires multiple organizations collaborating together. By engaging stakeholders outside the government, organizations can acknowledge and redefine their roles in the system and help establish collaborative agreements.
Linkage between performance and resource allocation
For many governments, the ultimate aim of management based on performance measures is to integrate program performance and outcome information with the budget process. During the budget process is the natural time to set goals and discuss results. Approaches range from budgets that include performance information to budgets that allocate funds according to desired outcomes, regardless of department. But integrating performance measures into the budget process is not easy. The budget process is and should be a political one. Also, factors outside an agency’s control will affect the measures.
Bureaucrats like to make everything look alike. But one size does not fit all. Forcing uniformity across distinct agencies and departments prohibits flexibility and ignores differences within the field of government. We need to remember that the intent of performance measures is to provide reliable and valid information on performance. We should not let forms and rigid definitions undermine that intent.
References & Bibliography
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