financial management series number 8 (instructional version) performance measurement &...

Financial Management SeriesFinancial Management SeriesNumber 8Number 8

(Instructional Version)(Instructional Version)

Performance Measurement Performance Measurement & Performance Based & Performance Based

Budgeting (PBB)Budgeting (PBB)

Financial Management SeriesFinancial Management SeriesNumber 8Number 8

(Instructional Version)(Instructional Version)

Performance Measurement Performance Measurement & Performance Based & Performance Based

Budgeting (PBB)Budgeting (PBB)Alan ProbstAlan Probst

Local Government SpecialistLocal Government Specialist

Local Government CenterLocal Government Center

UW-ExtensionUW-Extension

Part IPart IPart IPart I

OverviewOverviewOverviewOverview

Performance BudgetingPerformance BudgetingPerformance BudgetingPerformance Budgeting

Originated in late 1940’sOriginated in late 1940’s

Congress enacted through National Congress enacted through National Security Act of 1949 for newly formed Security Act of 1949 for newly formed Department of DefenseDepartment of Defense

Government Performance and Results Government Performance and Results Act (GPRA)Act (GPRA)

Performance BudgetingPerformance BudgetingPerformance BudgetingPerformance Budgeting

Based on the assumption that presenting Based on the assumption that presenting performance information alongside performance information alongside budget amounts will improve budget budget amounts will improve budget decision-making by focusing funding decision-making by focusing funding choices on program resultschoices on program results

Performance Based BudgetingPerformance Based BudgetingPerformance Based BudgetingPerformance Based Budgeting

Performance based budgeting Performance based budgeting cannotcannot begin begin until a system of until a system of performance measurementperformance measurement has been institutedhas been instituted

A functional performance based budgeting A functional performance based budgeting system cannot be expected to produce the system cannot be expected to produce the long-term desired results in the first year of long-term desired results in the first year of its inceptionits inception

Must build a Performance Based Must build a Performance Based Management SystemManagement System

Management ToolManagement ToolManagement ToolManagement Tool

Performance budgets focus on missions, Performance budgets focus on missions, goals, and objectives to explain why money goals, and objectives to explain why money is being spent and provide a way to allocate is being spent and provide a way to allocate resources to achieve specific resultsresources to achieve specific results

PBB is intended to be a management tool for PBB is intended to be a management tool for program improvement, not a “carrot and program improvement, not a “carrot and stick” methodology used to “punish” stick” methodology used to “punish” departments for not meeting goalsdepartments for not meeting goals

Why is this Important?Why is this Important?Why is this Important?Why is this Important?

Most Federal grants now require outcome Most Federal grants now require outcome evaluations (performance measurement) in their evaluations (performance measurement) in their applicationsapplications

Bond sales require indicators of financial condition Bond sales require indicators of financial condition which are well presented by performance datawhich are well presented by performance data

Local government revenues are becoming Local government revenues are becoming insufficient making effective use of resources insufficient making effective use of resources imperativeimperative

Promotes the logical tie between planning and Promotes the logical tie between planning and budgetingbudgeting

Why is this Important?Why is this Important?Why is this Important?Why is this Important? Both the Government Accounting Standards Both the Government Accounting Standards

Board (GASB) and the Government Finance Board (GASB) and the Government Finance Officers Association (GFOA) are promoting Officers Association (GFOA) are promoting performance measurement indicating it may performance measurement indicating it may soon become a requirementsoon become a requirement

Provides a way to quantify to the citizens Provides a way to quantify to the citizens how well their local government is doing how well their local government is doing compared to previous years and other compared to previous years and other similar communities; i.e. “how much bang similar communities; i.e. “how much bang they’re getting for their buck”they’re getting for their buck”

CAUTION!CAUTION!CAUTION!CAUTION!

One of the greatest mistakes in Performance One of the greatest mistakes in Performance Based Budgeting is to make simplified Based Budgeting is to make simplified assumptions based on unrefined results and assumptions based on unrefined results and then apply a system of rewards and then apply a system of rewards and punishments based on thempunishments based on them

Such an approach frequently yields adverse Such an approach frequently yields adverse program impactsprogram impacts

Unintended ConsequencesUnintended ConsequencesUnintended ConsequencesUnintended Consequences

If PBB used as a reward and punishment If PBB used as a reward and punishment system, how do you ensure that reducing a system, how do you ensure that reducing a budget by, say 5% for poor performance, budget by, say 5% for poor performance, doesn’t reap a future 20% decrease in future doesn’t reap a future 20% decrease in future performance?performance?

How do you ensure you’ve considered all How do you ensure you’ve considered all factors that may have affected the decline in factors that may have affected the decline in performance?performance?

Potential FlawsPotential FlawsPotential FlawsPotential Flaws

Incorrect assumptions or conclusionsIncorrect assumptions or conclusions

Police: Arrests are up; we gave you more Police: Arrests are up; we gave you more money, what’s wrong? money, what’s wrong?

Police: Arrests are down, we gave you more Police: Arrests are down, we gave you more money, what’s wrong?money, what’s wrong?

Do more arrests mean better police work, Do more arrests mean better police work, more crime, less crime, better crime more crime, less crime, better crime prevention, or less police work?prevention, or less police work?

ExampleExampleExampleExample

An effective Police Department deters crime, how does An effective Police Department deters crime, how does one measure “deterred’ crime?one measure “deterred’ crime?

““Police arrests are down 5% from last year so, under Police arrests are down 5% from last year so, under Performance Based Budgeting, we should reduce Performance Based Budgeting, we should reduce the Police budget by 5% until they improve their the Police budget by 5% until they improve their results” results”

Such a simplistic approach fails to account for the Such a simplistic approach fails to account for the success of crime prevention efforts and community success of crime prevention efforts and community policing, therefore, punishing good performancepolicing, therefore, punishing good performance

Interim SolutionInterim SolutionInterim SolutionInterim SolutionUntil a performance measurement system can Until a performance measurement system can

be fully implemented, an interim solution be fully implemented, an interim solution may help set the groundworkmay help set the groundwork

Departments heads provide a bullet narrative Departments heads provide a bullet narrative with annual budget requests including:with annual budget requests including: what department accomplished last year?what department accomplished last year? what is different in this year’s budget request?what is different in this year’s budget request? what goals has the department set for the coming what goals has the department set for the coming

year?year?

Part IIPart IIPart IIPart II

Performance Performance MeasurementMeasurementPerformance Performance MeasurementMeasurement

Performance MeasurementPerformance MeasurementPerformance MeasurementPerformance Measurement

The regular systematic collection, The regular systematic collection, analysis, and reporting of data that analysis, and reporting of data that tracks resources used, work produced, tracks resources used, work produced, and whether specific outcomes were and whether specific outcomes were achieved by an organizationachieved by an organization

Note: Measurements are only meaningful to the degree that they Note: Measurements are only meaningful to the degree that they are a basis for strategic and operational decision-makingare a basis for strategic and operational decision-making


Performance Measurement should:Performance Measurement should:

Be based on program goals and objectives that tie to Be based on program goals and objectives that tie to a statement of program mission or purposea statement of program mission or purpose

Measure program outcomesMeasure program outcomes Provide for resource allocation comparisons over Provide for resource allocation comparisons over

timetime Measure efficiency and effectiveness for continuous Measure efficiency and effectiveness for continuous

improvementimprovement Be verifiable, understandable, and timelyBe verifiable, understandable, and timely


Be consistent throughout the strategic plan, Be consistent throughout the strategic plan, budget, and accounting and reporting budget, and accounting and reporting systems over timesystems over time

Be reported internally and externally (Federal Be reported internally and externally (Federal grants do and GASB may soon require it)grants do and GASB may soon require it)

Be monitored and used in managerial Be monitored and used in managerial decision-making processesdecision-making processes

Performance MeasurementPerformance MeasurementPerformance MeasurementPerformance Measurement Be limited to a number and degree of Be limited to a number and degree of

complexity that can provide an efficient and complexity that can provide an efficient and meaningful way to assess the effectiveness meaningful way to assess the effectiveness and efficiency of key programsand efficiency of key programs

Motivate staff at all levels to contribute Motivate staff at all levels to contribute toward organizational improvementtoward organizational improvement

PrinciplesPrinciples PrinciplesPrinciples

Principle IPrinciple I

Establish broad goals to guide government decision-Establish broad goals to guide government decision-makingmaking

Basis for the development of policies, programs, and Basis for the development of policies, programs, and service types and levels to be providedservice types and levels to be provided

Developed after an assessment of community Developed after an assessment of community conditions and a review of internal operations of the conditions and a review of internal operations of the governmentgovernment

(GFOA)(GFOA)

Principle IIPrinciple IIPrinciple IIPrinciple II

Develop approaches to achieve goalsDevelop approaches to achieve goals

A government should have specific policies, plans, A government should have specific policies, plans, programs, and management strategies to define how programs, and management strategies to define how it will achieve its long-term goalsit will achieve its long-term goals

It is the policies, plans, and programs that define It is the policies, plans, and programs that define how the government will go about accomplishing how the government will go about accomplishing these goalsthese goals

(GFOA)(GFOA)

Principle IIIPrinciple IIIPrinciple IIIPrinciple III

Develop a budget with approaches to achieve goalsDevelop a budget with approaches to achieve goals

Prepare and adopt a financial plan and budget that Prepare and adopt a financial plan and budget that moves toward achievement of goals within the moves toward achievement of goals within the constraints of available resourcesconstraints of available resources

Provides for the preparation of a financial plan, Provides for the preparation of a financial plan, capital improvement plan, and budget optionscapital improvement plan, and budget options

(GFOA)(GFOA)

Principle IVPrinciple IVPrinciple IVPrinciple IV

Evaluate performance and make adjustmentsEvaluate performance and make adjustments

Program and financial performance should be Program and financial performance should be continually evaluated, and adjustments made, to continually evaluated, and adjustments made, to encourage progress toward achieving goalsencourage progress toward achieving goals

Based on this review, the government may need to Based on this review, the government may need to make adjustments to the budget, plans, and policies make adjustments to the budget, plans, and policies if goals are to be achievedif goals are to be achieved

(GFOA)(GFOA)

Performance IndicatorsPerformance IndicatorsPerformance IndicatorsPerformance Indicators

InputInput OutputOutput EfficiencyEfficiency Service QualityService Quality OutcomeOutcome Explanatory DataExplanatory Data

Performance Indicators should:Performance Indicators should:Performance Indicators should:Performance Indicators should:

Be quantifiable and measurableBe quantifiable and measurable Be relevant, understandable, timely, Be relevant, understandable, timely,

consistent, comparable, and reliableconsistent, comparable, and reliable Constitute a family of measuresConstitute a family of measures

- inputinput- outputoutput- efficiencyefficiency- service qualityservice quality- outcome- outcome

Types of Performance IndicatorsTypes of Performance IndicatorsTypes of Performance IndicatorsTypes of Performance Indicators

Input IndicatorsInput Indicators

- resources used to produce an - resources used to produce an output output

- examples- examples costs (direct costs plus fringe benefits)costs (direct costs plus fringe benefits) labor hourslabor hours


Output IndicatorsOutput Indicators

- quantity of units produced- quantity of units produced

- typically under managerial - typically under managerial controlcontrol

- examples- examples Miles of pipe visually inspectedMiles of pipe visually inspected Clients servedClients served


Efficiency IndicatorsEfficiency Indicators

- ratio of inputs used per unit of output (or - ratio of inputs used per unit of output (or outputs per input) outputs per input)

- examples- examples Cost per unit:Cost per unit: cost per ton of refuse collected, cost cost per ton of refuse collected, cost

per prisoner boarded, cost per transaction, etc.per prisoner boarded, cost per transaction, etc. Productivity:Productivity: hours per consumer complaint, plans hours per consumer complaint, plans

reviewed per reviewer, etc.reviewed per reviewer, etc.

Efficiency vs. EffectivenessEfficiency vs. EffectivenessEfficiency vs. EffectivenessEfficiency vs. Effectiveness

Efficiency is related to cost Efficiency is related to cost effectiveness, i.e. lowest costs for a effectiveness, i.e. lowest costs for a given output levelgiven output level

Effectiveness is related to if the service Effectiveness is related to if the service level meets the demands of the citizenslevel meets the demands of the citizens


Service Quality IndicatorsService Quality Indicators

- how satisfied customers are- how satisfied customers are- how accurately a service is - how accurately a service is provided provided- how timely a service is provided- how timely a service is provided

Percentage of respondents satisfied with servicePercentage of respondents satisfied with service Frequency of repeat repairsFrequency of repeat repairs Average wait timeAverage wait time


Outcome IndicatorsOutcome Indicators

- are qualitative consequences - are qualitative consequences associated with a program/service associated with a program/service- focus on the ultimate - focus on the ultimate “why”“why” of of providing the service providing the service- examples include:- examples include: Reduction in fire deaths/injuriesReduction in fire deaths/injuries Increase in job trainees who hold a job for more than six Increase in job trainees who hold a job for more than six

monthsmonths Decrease in low birth-weight babiesDecrease in low birth-weight babies

Four-Step Methodology*Four-Step Methodology*Four-Step Methodology*Four-Step Methodology*

Step 1:Step 1: Review and evaluate existing Review and evaluate existing department mission and cost center department mission and cost center goalsgoals

Step 2:Step 2: Identify service areas Identify service areas Step 3:Step 3: Define service area objectives Define service area objectives Step 4:Step 4: Identify indicators that Identify indicators that

measure progress toward objectivesmeasure progress toward objectives

*(Fairfax County, VA Performance Measurement System)*(Fairfax County, VA Performance Measurement System)

Step 1Step 1Cost Center Goal StatementCost Center Goal Statement

Step 1Step 1Cost Center Goal StatementCost Center Goal Statement

States what is to be accomplished (outcome)States what is to be accomplished (outcome) States what is to be provided/produced States what is to be provided/produced

(output)(output) States why cost center existsStates why cost center exists Identifies customersIdentifies customers Transcends several yearsTranscends several years Begins with “To and a verb”Begins with “To and a verb”

Cost Center Goal Template & Cost Center Goal Template & ExampleExample

Cost Center Goal Template & Cost Center Goal Template & ExampleExample

To provide/produce (To provide/produce (fill in service or productfill in service or product) ) to (to (fill in customerfill in customer) in order to () in order to (statement statement what you intend to accomplishwhat you intend to accomplish).).

Maternal and Child Health ServicesMaternal and Child Health ServicesTo provide maternity, infant and child health To provide maternity, infant and child health

care and/or case management to at-risk care and/or case management to at-risk women, infants and children in order to women, infants and children in order to achieve optimum health and well-beingachieve optimum health and well-being

Step 2Step 2Identifying a Service AreaIdentifying a Service Area

Step 2Step 2Identifying a Service AreaIdentifying a Service Area

Identify your Identify your majormajor activities activities Do not identify every activity; only major Do not identify every activity; only major

activitiesactivities- critical to success of agency’s mission- critical to success of agency’s mission

- consume significant portion of cost center - consume significant portion of cost center (department) budget (department) budget

- politically sensitive or frequently in spotlight- politically sensitive or frequently in spotlight - significant customer service focus- significant customer service focus

Group activities that have common Group activities that have common objectives and/or customersobjectives and/or customers

Step 3Step 3Service Area ObjectivesService Area Objectives

Step 3Step 3Service Area ObjectivesService Area Objectives

Support cost center goalSupport cost center goal Reflect planned benefits to customersReflect planned benefits to customers Allow measurement of progressAllow measurement of progress Quantify portion of the cost center goal Quantify portion of the cost center goal

that will be accomplished within the that will be accomplished within the fiscal yearfiscal year

Describe quantifiable future target Describe quantifiable future target (optional)(optional)

Step 3 Step 3 Objective Statement Template & Objective Statement Template &

ExampleExample

Step 3 Step 3 Objective Statement Template & Objective Statement Template &

ExampleExampleTo improve/reduce/maintain (To improve/reduce/maintain (accomplishmentaccomplishment) by () by (a a

number or percentagenumber or percentage), (), (from X to Yfrom X to Y) toward a target ) toward a target of (of (a numbera number).).

Maternal and Child Health ServicesMaternal and Child Health ServicesTo improve the immunization completion rate of To improve the immunization completion rate of

children served by the Health Department by 3 children served by the Health Department by 3 percentage points, from 77 percent to 80 percent, percentage points, from 77 percent to 80 percent, toward a target of 90 percent, which is the Healthy toward a target of 90 percent, which is the Healthy people year 2010 goal.people year 2010 goal.

Step 4Step 4Indicator Definitions & ExamplesIndicator Definitions & Examples


CategoryCategory Definition Definition Example Example

InputInput Resources used to produceResources used to produce Cost (direct Cost (direct costs costs an output an output plus fringe plus fringe

benefits) benefits) Staff hoursStaff hours

OutputOutput Quantity or number of units produced. Res. propertiesQuantity or number of units produced. Res. properties Activity-oriented, measurable and Activity-oriented, measurable and assessed assessed

within within usually managerial control. usually managerial control. Clients served Clients served Calls Calls

responded responded to to



EfficiencyEfficiency Inputs per unit of output or outputsInputs per unit of output or outputs Cost per appraisal Cost per appraisal

per inputper input Appraisal per Appraisal per appraiser appraiser

ServiceService Timeliness, accuracy and/or customer Errors per data Timeliness, accuracy and/or customer Errors per data entryentry

QualityQuality satisfaction of the service providedsatisfaction of the service provided operator operator

Response timeResponse time

Percentage of Percentage of

customers satisfiedcustomers satisfied



OutcomeOutcome Qualitative consequences Qualitative consequences Job trainees Job trainees associated with a program/service. who hold associated with a program/service. who hold

aa

Focuses on the ultimate “why” of Focuses on the ultimate “why” of job for job for more more

providing a serviceproviding a service than 6 than 6

monthsmonths

Input IndicatorsInput IndicatorsInput IndicatorsInput Indicators

Resources used to produce an outputResources used to produce an output Cost (budgeted or actual)Cost (budgeted or actual) Staff-year equivalents (SYE)Staff-year equivalents (SYE) Full-time equivalents (FTE)Full-time equivalents (FTE) Direct labor hours (DLH)Direct labor hours (DLH)

Costs as an Input IndicatorCosts as an Input IndicatorCosts as an Input IndicatorCosts as an Input Indicator

Direct costs plus fringe benefitsDirect costs plus fringe benefits

Direct costs are those devoted to a Direct costs are those devoted to a particular service and include:particular service and include: Personnel servicesPersonnel services Operating expensesOperating expenses Recovered costsRecovered costs Capital equipmentCapital equipment

Output IndicatorsOutput IndicatorsOutput IndicatorsOutput Indicators

What was produced/providedWhat was produced/provided

Usually end in “ed”Usually end in “ed”

Questions to askQuestions to ask What services were delivered?What services were delivered? What volume was provided?What volume was provided? How many units of service?How many units of service?

ExamplesExamplesExamplesExamples

Service AreaService Area IndicatorIndicator

Fire suppressionFire suppression Incidents responded toIncidents responded to

Human ResourcesHuman Resources Vacancies filledVacancies filled

LibraryLibrary New materials circulatedNew materials circulated

Efficiency IndicatorsEfficiency IndicatorsEfficiency IndicatorsEfficiency Indicators

Inputs used per unit of outputInputs used per unit of outputCost per unit where the input is money/dollarsCost per unit where the input is money/dollarsProductivity where the input is staff hoursProductivity where the input is staff hours

Examples:Examples:Cost per senior lunch servedCost per senior lunch servedCost per clientCost per clientInvestigations conducted per detectiveInvestigations conducted per detectiveHours per fire inspectionHours per fire inspection

Efficiency IndicatorsEfficiency IndicatorsEfficiency IndicatorsEfficiency Indicators


Fire SuppressionFire Suppression Cost per incidentCost per incident

Senior-based ServicesSenior-based Services Cost per clientCost per client

Human ResourcesHuman Resources Cost per vacancy Cost per vacancy filledfilled

Custodial ServicesCustodial Services Cost per square foot Cost per square foot cleanedcleaned

Service Quality IndicatorsService Quality IndicatorsService Quality IndicatorsService Quality Indicators

Measures customer satisfaction, Measures customer satisfaction, timeliness, and/or accuracy of a servicetimeliness, and/or accuracy of a service

Examples:Examples: Customer surveysCustomer surveys Response logsResponse logs Error ratesError rates

Service Quality IndicatorsService Quality IndicatorsService Quality IndicatorsService Quality Indicators


Fire SuppressionFire Suppression Average suppression response timeAverage suppression response time

Senior-based ServicesSenior-based Services Percent of clients satisfied with Percent of clients satisfied with services providedservices provided

Human ResourcesHuman Resources Satisfaction rate with vacancy Satisfaction rate with vacancy processingprocessing

Custodial ServicesCustodial Services Percent of customers satisfied Percent of customers satisfied with with custodial servicescustodial services

Outcome IndicatorsOutcome IndicatorsOutcome IndicatorsOutcome Indicators

Describe the benefit of the service to Describe the benefit of the service to the customerthe customer

Describe what was changed or Describe what was changed or accomplished as a result of the serviceaccomplished as a result of the service

Questions to ask:Questions to ask: How has the customer benefited?How has the customer benefited? Why is the customer better off?Why is the customer better off? What is the impact of the service?What is the impact of the service?

Outcome IndicatorsOutcome IndicatorsOutcome IndicatorsOutcome Indicators


Fire SuppressionFire Suppression Fire deaths per 10,000 Fire deaths per 10,000 populationpopulation

Fire injuries per 10,000 Fire injuries per 10,000 populationpopulation

Senior-based ServicesSenior-based Services Percent of clients who remain in the Percent of clients who remain in the community after one year of service community after one year of service or information.or information.

Human ResourcesHuman Resources Average recruitment timeAverage recruitment time

Custodial ServicesCustodial Services Percentile comparisons of cost per Percentile comparisons of cost per square foot to IFMA standardssquare foot to IFMA standards

The Logic ModelThe Logic ModelThe Logic ModelThe Logic Model

““Begin with the end in mind”Begin with the end in mind”

Start by asking:Start by asking:What results are we seeking?What results are we seeking?What are we hoping to What are we hoping to

accomplish?accomplish?How will we accomplish it?How will we accomplish it?

What is the Logic Model?What is the Logic Model?What is the Logic Model?What is the Logic Model?

A picture of a programA picture of a program A way to show the relationship between A way to show the relationship between

what we put in (inputs), what we do what we put in (inputs), what we do (outputs) and what results occur (outputs) and what results occur (outcomes)(outcomes)

Sequence of if/then relationshipsSequence of if/then relationships Core of program planning and Core of program planning and

evaluationevaluation

Logic ModelLogic ModelLogic ModelLogic Model

InputsInputs OutputsOutputs OutcomesOutcomes What we What we What we do Short-Term Medium-Term Long-TermWhat we do Short-Term Medium-Term Long-Term

investinvest

StaffStaff Workshops Awareness BehaviorWorkshops Awareness Behavior Conditions Conditions

DollarsDollars Outreach Knowledge DecisionsOutreach Knowledge Decisions Environment Environment

VolunteersVolunteers Inspections AttitudesInspections Attitudes Policies Policies Social Social

MaterialsMaterials Skills Skills Economic Economic

EquipmentEquipment Civic Civic

Technology Technology

Logic Model – Fire SuppressionLogic Model – Fire SuppressionLogic Model – Fire SuppressionLogic Model – Fire Suppression

InputsInputs OutputsOutputs OutcomesOutcomes What we What we What we do Short-Term Medium-Term Long-TermWhat we do Short-Term Medium-Term Long-Term

investinvest

StaffStaff Training Training Inspections Response Inspections Response Protection Protection DollarsDollars Inspections Suppression timeInspections Suppression time of lives & of lives &VolunteersVolunteers Emergency responses FireEmergency responses Fire property propertyMaterialsMaterials response Publicresponse Public containment (fire deaths containment (fire deathsTechnology Technology education Prevalence education Prevalence injuries, injuries, of smokeof smoke

detectors detectors

ExampleExampleService Area ObjectiveService Area Objective

ExampleExampleService Area ObjectiveService Area Objective

Teen Pregnancy PreventionTeen Pregnancy Prevention

AcceptableAcceptable UnacceptableUnacceptable

Reduce the teen pregnancy rate by 2Reduce the teen pregnancy rate by 2 Increase the number of Increase the number of pregnancies per 1,000 population pregnancies per 1,000 population localities with comprehensive localities with comprehensive from 42 to 40 in localities with from 42 to 40 in localities with teen services from 20 to 27 teen services from 20 to 27

comprehensive teen servicescomprehensive teen services

Performance Management ModelPerformance Management ModelPerformance Management ModelPerformance Management Model

GoalsGoals General Goals of program:General Goals of program: Provide quality services to all customersProvide quality services to all customers Maintain or improve performanceMaintain or improve performance Provide economical servicesProvide economical services

InputsInputs Resources:Resources: MoneyMoney FacilitiesFacilities EquipmentEquipment SuppliesSupplies Contracted servicesContracted services

Performance Management Model Performance Management Model (cont.) (cont.)

Performance Management Model Performance Management Model (cont.) (cont.)

ActivitiesActivities Work processes:Work processes: Salting roadsSalting roads Making arrestsMaking arrests Processing billsProcessing bills Performing inspectionsPerforming inspections

OutputsOutputs Goods & Services produced:Goods & Services produced: Statistical measurementsStatistical measurements Miles of roads repairedMiles of roads repaired Tons hauled or recycledTons hauled or recycled Positions filledPositions filled

Performance Management Model Performance Management Model (cont.)(cont.)

Performance Management Model Performance Management Model (cont.)(cont.)

OutcomesOutcomes Results and ImpactsResults and Impacts 100% of customers will report being satisfied100% of customers will report being satisfied 95% will be error free95% will be error free 90% of services will be within +/- 2% of comparable 90% of services will be within +/- 2% of comparable

service within the private sectorservice within the private sector

PerformancePerformance MeasurementMeasurement Administration of customer satisfaction surveysAdministration of customer satisfaction surveys Tracking number of jobs, error rates, average per jobTracking number of jobs, error rates, average per job Cost comparison to private sector servicesCost comparison to private sector services Quarterly and annual reports summarizing services Quarterly and annual reports summarizing services

provided, ouputs ad outcome achievementprovided, ouputs ad outcome achievement

Remember Remember Remember Remember

Quantify objectivesQuantify objectives Associate objectives with an outcomeAssociate objectives with an outcome Word outcomes the same as objectivesWord outcomes the same as objectives Provide a complete Family of MeasuresProvide a complete Family of Measures Avoid confusing indicators (e.g. efficiency and Avoid confusing indicators (e.g. efficiency and

service quality)service quality) Reference the correct baseline to target year for Reference the correct baseline to target year for

objectiveobjective Define service areas by program Define service areas by program

objective/customers rather than process functionobjective/customers rather than process function

Part IIIPart IIIPart IIIPart III

BenchmarkingBenchmarkingBenchmarkingBenchmarking

DefinitionDefinitionDefinitionDefinition

““Formal benchmarking is the continuous, Formal benchmarking is the continuous, systematic process of measuring and systematic process of measuring and assessing products, services and assessing products, services and practices of recognized leaders in the practices of recognized leaders in the field to determine the extent to which field to determine the extent to which they might be adapted to achieve they might be adapted to achieve superior performance.”superior performance.”

Benchmarking & Best Practices, Treasury Board of CanadaBenchmarking & Best Practices, Treasury Board of Canada

Another DefinitionAnother DefinitionAnother DefinitionAnother Definition

““Benchmarking is the practice of being Benchmarking is the practice of being humble enough to admit that someone humble enough to admit that someone else is better at something and wise else is better at something and wise enough to try and learn how to match enough to try and learn how to match and even surpass them at it.”and even surpass them at it.”

Types of BenchmarkingTypes of BenchmarkingTypes of BenchmarkingTypes of Benchmarking

InternalInternal – commonly one year – commonly one year compared to a previous year’s compared to a previous year’s performance performance

ExternalExternal – your performance compared – your performance compared to another similar organizationto another similar organization

OperationalOperational – your recent annual or – your recent annual or periodic performanceperiodic performance

StrategicStrategic – long term performance – long term performance

Internal OperationalInternal OperationalInternal OperationalInternal Operational

Probably the most common measure at Probably the most common measure at the local government levelthe local government level

Measures current performance versus Measures current performance versus an established benchmark from prior an established benchmark from prior performanceperformance

Example: Police Dept. criminal cases Example: Police Dept. criminal cases closed this year versus the average closed this year versus the average over the past ten yearsover the past ten years

External OperationalExternal OperationalExternal OperationalExternal Operational Measurements against other organization’s Measurements against other organization’s

performanceperformance Example:Example:

Total Structure Fires Incidents Per 10,000 PopulationTotal Structure Fires Incidents Per 10,000 Population

0 20 40 60 80

Beloit

Eau Claire

Janesville

Platteville

Whitewater

Series2

Series1

POLICEViolent Crimes Reported Per 1,000 Population

0123456789

Series1

Series2

Series3

BenchmarksBenchmarksBenchmarksBenchmarks

Internal BenchmarksInternal Benchmarks

- Overall spending- Overall spending

- Growth in tax base- Growth in tax base

- Growth in income- Growth in income

- New home starts- New home starts

- Miles within service - Miles within service areaarea

External BenchmarksExternal Benchmarks

- Private sector wages- Private sector wages

- Neighboring cities- Neighboring cities

- Similar sized counties- Similar sized counties

- Statewide groupings- Statewide groupings

- Statewide averages- Statewide averages

Benchmark StandardsBenchmark StandardsBenchmark StandardsBenchmark Standards

Program dollars spent per capitaProgram dollars spent per capita Spending per $1,000 property Spending per $1,000 property

assessmentassessment Percentage growth over timePercentage growth over time Adjustments for inflationAdjustments for inflation Other specific service standardsOther specific service standards

Setting TargetsSetting TargetsSetting TargetsSetting Targets

BenchmarkingBenchmarking National standardsNational standards MandatesMandates Board directionBoard direction Past PerformancePast Performance Internal goalsInternal goals Citizen demandsCitizen demands

Part IVPart IVPart IVPart IV

Performance Based Performance Based Budgeting (PBB)Budgeting (PBB)

Performance Based Performance Based Budgeting (PBB)Budgeting (PBB)

Performance Based Budgeting Performance Based Budgeting

(PBB(PBB)) Performance-based budgeting relies on:

1. Strategic planning2. Operational planning3. Performance accountability4. A realistic performance measurement system

to build budgets.

Performance-based Budgeting (PBB)Performance-based Budgeting (PBB) Performance-based budgets focus on Performance-based budgets focus on “return on “return on

investment”investment”—that is, what do we get for our investment of —that is, what do we get for our investment of resources?resources?

Basic service level (or continuation of basic services)?Basic service level (or continuation of basic services)?

Increased services (more services to same recipients or Increased services (more services to same recipients or expansion of same services to more recipients)?expansion of same services to more recipients)?

Better (higher quality) services?Better (higher quality) services?

More efficient services (cost savings in service More efficient services (cost savings in service delivery)?delivery)?

Mitigation or resolution of a problem?Mitigation or resolution of a problem?

Performance-based Budgeting Performance-based Budgeting (PBB)(PBB)


““PBB PBB is budgeting for results - with an eye is budgeting for results - with an eye on the price tag”on the price tag”

PBB emphasizes program effectiveness and bases decision PBB emphasizes program effectiveness and bases decision making (whether for continuation or enhancement of a making (whether for continuation or enhancement of a program) on outcomes.program) on outcomes.

However, the costs of achieving those outcomes must be However, the costs of achieving those outcomes must be scrutinized to ensure efficient service delivery and scrutinized to ensure efficient service delivery and maximize allocation of scarce resources. maximize allocation of scarce resources.

Goal SettingGoal SettingGoal SettingGoal Setting

A A SMARTSMART goal is defined as such: goal is defined as such:

SSpecificpecific – Is the goal clear and to the point? – Is the goal clear and to the point? MMeasurableeasurable – Can you tell if it is – Can you tell if it is

accomplished?accomplished? AAttainablettainable – Is it a realistic goal? – Is it a realistic goal? RRelevant elevant – Is it a priority of the organization?– Is it a priority of the organization? TTrackablerackable – Results are compared over time? – Results are compared over time?

SMART ExamplesSMART ExamplesSMART ExamplesSMART Examples

YesYes:: To respond to all fire calls within the To respond to all fire calls within the city within 7 minutes of dispatchcity within 7 minutes of dispatch

NoNo:: To protect all property within the city to To protect all property within the city to a high level of safetya high level of safety

YesYes:: To process all building permit requests To process all building permit requests within 48 hours of applicationwithin 48 hours of application

NoNo:: To process all building permit requests To process all building permit requests in the shortest time possiblein the shortest time possible

Rudimentary PBBRudimentary PBBRudimentary PBBRudimentary PBB

A rudimentary form of PBB to be implemented until a A rudimentary form of PBB to be implemented until a formal system can be produced could include the formal system can be produced could include the following in each department’s budget request:following in each department’s budget request: An explanation of the department’s overall goalsAn explanation of the department’s overall goals An explanation of what the department has accomplished in An explanation of what the department has accomplished in

the past yearthe past year An explanation of what the department intends to An explanation of what the department intends to

accomplish in the coming yearaccomplish in the coming year An explanation as to what is different from last year in the An explanation as to what is different from last year in the

proposed budget and whyproposed budget and why A GASB compliant budget showing past year budget A GASB compliant budget showing past year budget

expenditures expenditures



Program StructureProgram Structure Strategic plans, operational plans, and performance Strategic plans, operational plans, and performance

based budgets are geared to program structuresbased budgets are geared to program structures Funds are appropriated to departments/programsFunds are appropriated to departments/programs A program is a grouping of activities directed toward A program is a grouping of activities directed toward

the accomplishment of a clearly defined objective or the accomplishment of a clearly defined objective or set of objectivesset of objectives

Program structure is an orderly, logical array of Program structure is an orderly, logical array of programs and activities that indicates the programs and activities that indicates the relationship between eachrelationship between each

TOP TEN REASONS WHY PERFORMANCE-BASEDBUDGETING WON’T WORK IN MY DEPARTMENT

TOP TEN REASONS WHY PERFORMANCE-BASEDBUDGETING WON’T WORK IN MY DEPARTMENT

10.10. It doesn’t matter what we do because we have federal/state funding.It doesn’t matter what we do because we have federal/state funding.

9. We just reorganized and we don’t know what we’re doing yet.9. We just reorganized and we don’t know what we’re doing yet.

8. Everything is just fine as it is; we’ve always done it this way.8. Everything is just fine as it is; we’ve always done it this way.

7. We’re too busy getting REAL work done to bother with this.7. We’re too busy getting REAL work done to bother with this.

6. We need more staff, more money, more time, more 6. We need more staff, more money, more time, more ( fill in the blank )( fill in the blank ) to do this. to do this.

5. We can’t target outcomes; they’re too specific.5. We can’t target outcomes; they’re too specific.

4. We can’t measure what we do.4. We can’t measure what we do.

3. You’ll misinterpret any information we give you.3. You’ll misinterpret any information we give you.

2. We can’t be accountable because we have no control over anything2. We can’t be accountable because we have no control over anything..

1. We’re different. This shouldn’t apply to us. We need an exemption.1. We’re different. This shouldn’t apply to us. We need an exemption.

OFTEN FOLLOWED BY:OFTEN FOLLOWED BY:

All right, just give me a form and tell me All right, just give me a form and tell me what you want me to say.what you want me to say.

If I give them something, then they’ll go away. (Maybe this

whole thing will just go away.)

NOTE: This genie won’t go back into the lamp.

INSTITUTIONALIZING PERFORMANCE MEASUREMENT:


Make performance an integral part of your management processes.

Use metrics to understand and measure how a process works and the results it generates.

Develop an internal performance accountability process.

Integrate performance into policy and budget decision making and everyday program management.

POINTER: When you break down a policy, program, or process into its component parts, you use "systems logic" to develop a model of how it should work

INPUT OUTPUT & OUTCOMEPROCESS

EFFICIENCY

QUALITY

Managers should use metrics to gauge and assess program and processes, diagnose problems, and formulate solutions.



ExampleExampleExampleExample

Service Area Objective Input Output EfficiencyService Quality Outcome

Fire Suppression

To maintain fire loss at 0.02% or less of

Total Property Valuation $249,000 77 $3,234

7.3 minutes

0.027% fire loss

incidents responded

tocost per response

Average response

timeaverage fire loss percent

Example 2Example 2Example 2Example 2

Service Area Objective Input Output EfficiencyService Quality Outcome

Street Reconstruction 5% $1,374,500 4 4.7% 75% 7%

Capital Facilities

Maintain construction cost

growth to no more than 5

percent

Budget/actual costs Staff

Projects completed

Engineering design

costs as a percent

of total project

cost

Percent of projects completed on time

Contract cost

growth (%)

Metrics (performance indicators) measure process and product.

Inputs Outputs & OutcomesProcess

Efficiency:

OutputsInputs

Outputs or OutcomesCost

Outputs or OutcomesTime

Quality: Effectiveness in meeting the expectations of customers, other stakeholders; and expectation groups.

(Products)(Services)

(Results)

(Expenditures compared to productivity;caseload per staff member.)

(Cost per item produced, serviceprovided, or client served; cost perresult achieved.)

(Production or turnaround time; timeliness of results.)

(Demand)(Need)

(Size of Problem)(Resources)



The volume of performance The volume of performance information that must be managed information that must be managed

can be staggering.can be staggering.

Watch out for the “shotgun” or “kitchen sink” approach--reporting just about every type of measurement or statistic that is already gathered or can be counted easily. This leads to a heavy emphasis on transactional data--inputs and outputs--rather than results.



Concentrate on the development of balanced sets of Concentrate on the development of balanced sets of performance indicators in order to provide a clear picture of performance indicators in order to provide a clear picture of performance without overwhelming users with needless detailperformance without overwhelming users with needless detail

Five types of performance indicators:Five types of performance indicators: InputInput OutputOutput OutcomeOutcome EfficiencyEfficiency QualityQuality

A balanced set may include more than one of any indicator A balanced set may include more than one of any indicator indicator type and none at all of some but must have at indicator type and none at all of some but must have at least one measure of outcome, efficiency, or qualityleast one measure of outcome, efficiency, or quality



Present performance information at Present performance information at different levels in order to surface key data different levels in order to surface key data while maintaining the availability of support while maintaining the availability of support and explanatory material.and explanatory material.

Key Performance Indicators Key Performance Indicators Supporting Performance Indicators Supporting Performance Indicators General Performance Information General Performance Information Explanatory NotesExplanatory Notes

Get consensus among data users on indicator Get consensus among data users on indicator types and levels before indicators are reported.types and levels before indicators are reported.



A key performance indicator is a performance indicator that is included in the Budget Supporting Documents

Factors in determining key level include: Most direct measure of outcome? Critical success factor? Big ticket item? Hot button item? History and who values?



General performance information (GPI) may be included in the budget. However, values for general performance indicators are reported for prior year actual only.

GPI may include:

Multi-year histories or trends

External comparisons (national or regional)



MANAGING ACCURACY:MANAGING ACCURACY:MANAGING ACCURACY:MANAGING ACCURACY:

Beware of:Beware of:

High balls and low ballsHigh balls and low balls (unrealistically high or low (unrealistically high or low performance targets)performance targets)

Instant replaysInstant replays (reporting the same performance (reporting the same performance level over and over, regardless of circumstances)level over and over, regardless of circumstances)

Greased pigsGreased pigs (indicators for which name, (indicators for which name, definition, or method of calculation change so definition, or method of calculation change so often that you can’t get a handle on them)often that you can’t get a handle on them)

Beware of: (cont.)Beware of: (cont.)Beware of: (cont.)Beware of: (cont.)

Orphans Orphans (indicators for which no one (indicators for which no one claims responsibility)claims responsibility)

Statistical illiteracyStatistical illiteracy (calculations that don‘t (calculations that don‘t add add up)up)

Limp excusesLimp excuses (meaningless explanations of (meaningless explanations of performance variances)performance variances)

Get the right start by developing Get the right start by developing meaningful, valid, accurate, and reliable meaningful, valid, accurate, and reliable performance indicatorsperformance indicators

Provide documentation for each Provide documentation for each performance indicator identified in the performance indicator identified in the strategic plan.strategic plan.

Strategic planning guidelines include Strategic planning guidelines include performance indicatorsperformance indicators

MANAGING ACCURACY:MANAGING ACCURACY:MANAGING ACCURACY:MANAGING ACCURACY:

Establish the link between resources and Establish the link between resources and results early and maintain that link through results early and maintain that link through budget development, appropriation, and budget development, appropriation, and budget control processes.budget control processes.

INTEGRATING PERFORMANCE INTO BUDGET DECISION MAKING:

INTEGRATING PERFORMANCE INTO BUDGET DECISION MAKING:

Set performance standards linked to appropriation levels

• Performance standards are the expected levels of performance associated with a performance indicator for a particular period and funding level. They link dollars and results

• Performance standards are one way to demonstrate RETURN ON INVESTMENT--what we can expect to receive for our money (easier to explain to stakeholders)

Integrating Performance into budget Integrating Performance into budget decision-makingdecision-making

Integrating Performance into budget Integrating Performance into budget decision-makingdecision-making

Establish the link between resources and results early and maintain that link through budget development, appropriation, and budget control processes.

During budget development, performance indicator values During budget development, performance indicator values associated with the funding level recommended in budget associated with the funding level recommended in budget discussions are proposed performance standardsdiscussions are proposed performance standards

During the budget process, performance indicator values become During the budget process, performance indicator values become performance standards linked to the funding amounts actually performance standards linked to the funding amounts actually appropriated in the budgetappropriated in the budget

Performance standards may be modified only through approved Performance standards may be modified only through approved processes processes

Performance standards are monitored and trackedPerformance standards are monitored and tracked

ReferencesReferencesReferencesReferences

““Performance Based Budgeting – Putting The Pieces Together,” Carolyn Performance Based Budgeting – Putting The Pieces Together,” Carolyn S. Lane, Deputy Director, Office of Planning and Budget, Division of S. Lane, Deputy Director, Office of Planning and Budget, Division of Administration, State of Louisiana, September 2006Administration, State of Louisiana, September 2006

““Performance Management: Using Performance Measurement for Performance Management: Using Performance Measurement for Decision Making” Recommended Practice (2002 & 2007) Government Decision Making” Recommended Practice (2002 & 2007) Government Finance Officers Association (GFOA)Finance Officers Association (GFOA)

““Fairfax County’s Performance Measurement System” Performance Fairfax County’s Performance Measurement System” Performance Measurement Team, Dept. of Management & Budget, Fairfax County, Measurement Team, Dept. of Management & Budget, Fairfax County, Virginia, June 2006Virginia, June 2006

““Performance Management Handbook” Eau Claire County, WI, January Performance Management Handbook” Eau Claire County, WI, January 20072007

““Moving From Line Item to Performance Based Budgeting: Craig Maher, Moving From Line Item to Performance Based Budgeting: Craig Maher, UW OshkoshUW Oshkosh

financial management series number 8 (instructional version) performance measurement &...

Documents

performance budgeting

future performance

poor performance

performance information

good performance slide

budgeting slide

performance data bond

police arrests