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Management Case Study

Outcome-Based Performance Management: Christchurch City Council Drives Toward a Long-Term Strategic Horizon

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Outcome-Based Performance Management: Christchurch City Council API Case Study

© 2008 Advanced Performance Institute, BWMC Ltd. (All rights reserved) www.ap-institute.com


By Bernard Marr* and James Creelman

Abstract: Many organisations, especially in the government sector, are aiming to

create more outcome-based performance management systems. The aim of these

systems is to prioritise strategic objectives, clearly articulate the intended impacts,

and to focus management attention onto the things that matter the most. This

management case study outlines how Christchurch City Council has put this into

practice using the Balanced Scorecard approach with strategy maps, long-term

community council plans, the Malcolm Baldrige framework, and an intranet-based

performance management software tool.

Version: 8 September 2008 * corresponding author

Bernard Marr is the Chief Executive and Director of Research at the Advanced Performance Institute. E-mail: [email protected] James Creelman is a Fellow of the Advanced Performance Institute The Advanced Performance Institute (API) is a world-leading independent research and advisory organisation specialising in organisational performance. It provides expert knowledge, research, consulting and training to performance orientated companies, governments and not-for-profit organisations across the globe. For more reading material or information on how the API might be able to help your organisation please visit: www.ap-institute.com How to reference this case study: Marr, B. and Creelman, J. (2008) Outcome-Based Performance Management: Christchurch City Council Drives Toward a Long-Term Strategic Horizon, Management Case Study, The Advanced Performance Institute (www.ap-institute.com).




Introduction

New Zealand has one of the most advanced approaches in the world for ensuring outcome-based public sector performance management. Each of the nation’s 85 local authorities must create Long Term Community Council Plans that set performance goals over a 10-year horizon. At the core of these plans are a set of community outcomes that are identified through an extensive, heavily participative and legally mandated consultation programme with local residents and other groups. This management case study outlines how Christchurch City Council has implemented a performance management system to better operationalise its long term-goals. Their approach includes a Strategy Map (which it calls ‘Plan on a Page’) that focuses on a critical few strategic objectives. This is supported by a comprehensive intranet-based system performance management and measurement system called Horizon that collocates and tracks a large number of operating measures and improvement initiatives. Importantly, the Horizon metrics etc aggregate up to the Plan on the Page objectives. As a further mechanism for driving forward performance Christchurch City Council assesses performance to the criteria of the Malcolm Baldrige framework. Recently the council was a recipient of the New Zealand version of the Baldrige award.

About Christchurch City Council

Located on the east coast of New Zealand’s South Island, the City of Christchurch has a population of about 350,000, making it the nation’s second biggest city after Auckland. Internationally recognized as ‘a garden city’ due to its expansive parks and public gardens, Christchurch was designated an International Safe Community in October 2008 by the World Health Organization. This designation was based on criteria such as accident prevention, road safety and crime prevention. The region is technologically advanced by international standards and is the main distribution centre for the South Island and is also considered the gateway to the Antarctic. With two universities and 16 research institutions it boasts a stable and well-educated workforce. Christchurch City Council covers an area of 152,837 hectares. This area includes highly urbanized city areas as well as extensive agriculture and areas of natural beauty, including Banks Peninsula. The Council has an annual budget of about M $670 and about 2,700 employees. It has a fast growing population that increased by nearly 12% between 1991 and 2001 and is projected to grow by another 16% by 2026.

Community Outcomes

The New Zealand Local Government Act of 2002 is one of the most progressive approaches to public sector performance management in the world. Peter Ryan, Manager, Planning and Performance at



Christchurch City Council, believes that it has made best-practice planning and delivery mandatory for local government. For instance, as a legal requirement each authority must, and in consultation with residents and community groups, identify community outcomes, with a robust set of supporting metrics. Ryan who achieved significant successes in improving public sector performance in non-New Zealand agencies (in particular the City of Brisbane, where he spearheaded the building and implementation of a Balanced Scorecard that led to the city’s induction into the Balanced Scorecard Hall of Fame) has been instrumental in Christchurch City Council’s performance management implementation. Community outcomes are reviewed every six years. The present outcomes for Christchurch City Council, which take the city to 2012, are a safe city; a city of people who value and protect the natural environment; a well-governed city; a prosperous city; and a healthy city. These are shown with supporting performance indicators in Figures 1.1 and 1.2. These outcome objectives were arrived at through a number of participative processes that were conducted during a year period, including:

• Results from monitoring trends and other information (more than 500 measures);

• Reviews of prior consultations (5000 submissions, 54 reports);

• Reviews of reports and literature (300 reports);

• Reviews of government strategies (187 strategies);

• Review of existing Council strategies and Community Board statements;

• Stock-take of existing services and funding from the Council and government

• agencies;

• Interviews with key stakeholders;

• Interviews and workshops with elected members;

• Research with key groups such as people with disabilities, Maori and Pacific people;

• Discussion papers developed with external stakeholders and reference groups;

• Feedback on the 2004 to 2014 LTCCP and the Community Outcomes developed in 2004;

• Feedback from a specially designed section on the Council’s website.

Long-term Council Community Plan

How the Christchurch City Council delivers these community outcomes is described in great detail within the Long-Term Council Community plan (LTCCP). This is the council’s ‘contract with the community’ describing how it intends to deliver to achieve the outcomes as well as the other long-term goals of the city. “The shift from community outcomes to the LTCCP means a move from the conceptual to the highly concrete,” explains Ryan. The LTCCP covers a period of 10 consecutive financial years, though it is reviewed every three years; the most recent preparation being in 2008 for the 2009-2019 period. This allows the Council to take a long-term view while enabling it to adjust for constantly changing financial and other factors and keep its accounting and budgets up-to-date.



The Balanced Scorecard

Given the size and multi-level complexity of its planning exercises, the council has introduced the Balanced Scorecard as a core framework for

coordinating and managing its strategy implementation efforts. Christchurch City Council has a full suite of cascaded scorecards from the executive management to team levels.

Figure 1.1: Community Outcomes and Performance Indicators

Community Outcome We will know we are using these key indicators

Progress will be measured Using these key indicators

A Safe City

We live free from crime, violence, abuse and injury. We are safe at home and in the community. Risks from hazards are managed and mitigated.

• Rates of crime and injury decline.

• People feel safe at all times in

Christchurch. • We have excellent safety

networks, support people and services.

• Hospital treatment for • accidents • Total offences • Notifications to CYF • Perceptions of safety • Road casualty statistics

A City of Inclusive and Diverse Communities

Our diversity is seen, heard, valued and celebrated. All people feel a sense of belonging and participate in the community.

• Our city is built on strong communities.

• A diverse range of people feel

at home in Christchurch. • Everybody is able to

participate, particularly those who are most vulnerable.

• New Zealand Deprivation Index • Income gap between low and • high income earners • Perceptions of ethnic diversity • Maori language speakers • Perceptions of quality of life • Perceptions of community • Support

A City of people who value and protect the natural environment

Our lifestyles reflect our commitment to guardianship of the natural environment inland around Christchurch. We actively work to protect, enhance and restore our environment for future generations.

• Everybody takes responsibility for their impact on the natural environment.

• Biodiversity is restored,

protected and enhanced. • We manage our city to

minimise damage to the environment.

• Tonnes of waste to landfill • Liquid waste • Total ground water use • Renewable versus nonrenewable

energy consumption • Waste recycling • Recreational water quality • Number and area of ecological

heritage sites



However, Christchurch City Council does not use the term Balanced Scorecard or indeed Strategy Map. They are simply known as ‘Plan on a Page’. According to Ryan this was a deliberate ploy to help secure buy-in: “The problem is that the term Balanced Scorecard conjures up an image of

compliance and of a report card. It doesn’t do justice to the aim of the methodology.”

Plan on a Page

Figure 2 shows the Plan on a Page for the Executive Team. As befitting the priorities of a

Figure 1.2: Community Outcomes and Performance Indicators

Community Outcome We will know we are using these key indicators

Progress will be measured Using these key indicators

A well governed city

Our values and ideas are reflected in the actions of our decision-makers. Our decision-makers manage public funds responsibly, respond to current needs and plan for the future.

• Everybody actively participates in public decision-making.

• Everybody feels represented by

their decision-makers. • Our decision-makers plan for a

sustainable Christchurch.

• Confidence in council decision-making

• Representation on school boards of trustees

• Census response rates • Voter turnout at council elections • Voter turnout at general

Elections

A prosperous city

We have a strong economy that is based on a range of successful and innovative businesses. We value sustainable wealth creation, invest in ourselves and in our future.

• Christchurch has a strong, healthy economy.

• Standards of living improve for

everyone. • Our economic development

prioritizes future well-being.

• Economic Activity Index • Full and part time employment

rates • Unemployment rate • Personal, family and household

income • Volume of commercial waste • Recycling

A healthy city

We live long, healthy and Happy lives.

• We all have access to affordable health services that meet our needs.

• More people in Christchurch live

healthy lifestyles. • Our city environment supports

the health of the community.

• Self reported health status • Life expectancy • Frequency of physical activity • Type 2 diabetes rates • Barriers to accessing GPs • Number of days exceeding air

quality guidelines



public sector organization, the top perspective is customer rather than financial, as the ultimate goal is to deliver value to the community rather than shareholders. In the Appendix we show the key metrics, targets and initiatives (or Balanced Scorecard that support the Executive Team Plan on the Page. Note that CEO Tony Marryatt is principles owner of the measures.

Common Objectives

Each Plan on a Page, from the executive team through general managers and down into units, carry a core of ‘vital few’ objectives (with supporting measures and targets). These align all the scorecard levels. These objectives are: Customer: Deliver long term plan levels of service and projects

Finance: Deliver services and projects to budget Process: ‘Create the long-term council community plan for 2009-19’, plus ‘Instill customer-centric processes’ People: Implement organizational workforce planning (‘right people, right place, right time’) and ‘Increase staff engagement’ (measured via international Hewitt methodology). Figures 3 and 4 show the Plan on the Page Strategy Maps for City Environment and the Strategy and Planning Group. As examples of common measures and targets the customer objective ‘deliver long term plan levels of service’ is measured by the overall percentage of levels of service being achieved.

Figure 2: Plan on a Page – Executive Team



Figure 3: Plan on a Page – City Environment

Figure 4: Plan on a Page – Strategy and Planning Group



At the organizational level, this target means all the levels of service for the organization. In a department, it will mean those levels of service for which the department is responsible. ”This achieves alignment,” claims Ryan. “These half dozen ‘vital few’ measures and targets tie and align all the scorecards by operating as a cascade.” Ryan stresses that as well as viewing the vital few metrics leaders must be able to drill down and see performance to metrics and targets to many performance dimensions. “At any one time we are tracking perhaps 250 levels of service across such diverse services as libraries, water, child care, economic development or roading,” says Ryan. “We are also tracking maybe a thousand capital projects around the city.” He continues that executives clearly need a summary in their scorecard but they also need to know where to intervene where a contributing factor is driving an objective off track.

Horizon Scorecard

This is enabled though Horizon, which is an in-house developed software system that contains the city’s comprehensive collection of metrics, targets and initiatives “Horizon combines the key features of an executive information system with project management and value analysis, providing a clear line of sight from strategy to operational tasks,” Ryan says. Moreover, it is fully transparent and can be accessed by anyone in the organization. “Such openness helps create a performance-oriented culture as everyone can see how everyone else is performing.” Horizon provides both the summary view against the Plan on a Page targets, as well as any exceptions. In the case of the ‘deliver levels of

service’ objective, this means the report summary provides a single result against the target (say 83% of levels of service achieved) but it also means seeing a list of any services that are not on track, who is running them and what that officer recommends going forward.” It’s summary reporting at the strategic level and exception based reporting at operational level,” explains Ryan. Figure 5 is a screenshot of the Horizon online front-page, which provides employees with a navigational aid for going to any of the organizational scorecards and viewing performance to any of the perspectives or indeed individual performance areas. Using City Environment as an illustration, Figure 6 provides an overview of actual performance against designated targets, with the responsible manager clearly identified. Figure 7 provides information on which people are assisting with the delivery of a particular initiative. “It is not possible for the accountable manager to throw the light on the measure without looking at how the supporting initiatives are performing,” explains Ryan. The system also enables the loading and tracking of the individual's performance plan for the year and for monitoring how an individual is performing any point in time. Accountability for measures and their supporting initiatives is therefore very clear and cascaded to individuals on a methodical basis.

Incentive Compensation

Unusually for a public sector organization Christchurch City Council uses incentive compensation as a key mechanism for ensuring that people focus in performance to scorecard goals.



Introduced in July 2007, fully 450 people (covering all the management layers and forming about 1/8 of the workforce) have the major portion of their remuneration tied to scorecard results.

The compensation link works this way. The performance assessment is weighted to highlight the council’s scorecard priorities. Therefore in 2007 35% of the bonus was dependent on performance

Figure 5: Horizon Screenshot

Figure 6: Performance Overview - Horizon



to the customer perspective, 20% was allocated to the financial perspective, people 15% and process 10%. The remaining 20% of the bonus is linked to individual development targets. “This review and compensation link is based on performance to clearly defined measures and targets,” says Ryan. “It is a lot more scientific that the ad-hoc discussion that often informs public sector performance reviews.”

Horizon Update

The online Horizon tool is updated monthly (by the aforementioned 450 accountable managers). This update triggers a report for each Plan on a Page / Horizon scorecard. A high level one page overview is supplied for each of the four perspectives, followed by a detailed list of exceptions (results flagged as amber or red). When exceptions are signaled the responsible manager must outline options and a next-step solution, in addition to any explanation of performance variance. “The most common complaint leveled at any form of

management reporting is that it provides either too little detail by being strategic or too much detail by being operational,” says Ryan. “By focusing on the ‘vital few’ objectives and their results in our scorecards, we have sharpened up reporting while keeping it strategic. He continues that by adding operational detail around those objectives only where action is required, the council has reduced report volume while still providing the right level of detail to make fixes possible.

Measures of Success

With Christchurch City Council inculcating such robust and comprehensive performance management and measurement systems the million dollar question is how successful is it proving to be in driving up performance. As an indication of their successes, annual residents’ surveys show that 70% of Christchurch residents are “very satisfied” with Christchurch as a place to work, live and play, and also with the way the city looks and feels. Customer satisfaction with service at first point of contact is consistently over 95%. Moreover, in

Figure 7: Initiative Tracking - Horizon



delivering these results the city council has maintained a Standard and Poors AA+ rating. This shows its commitment to return an annual operating surplus each year and manage its level of debt.

Malcolm Baldrige Framework

As another powerful indicator of the success of the organization, Christchurch City Council is recognized as an exemplary user of the Malcolm Baldrige Model. Launched in 1987 as a methodology with which to improve the performance of US companies, the Baldrige model assesses performance to seven performance categories: Leadership, Strategic Planning, Customer and Market Focus, Information and Analysis, Human Resource Focus, Process Management and Results. Such has been the model’s success that it has now spawned international awards, for instance the Performance Excellence Study Award (PESA) in New Zealand. PESA is open to organizations from the public and private and there are three categories to the award (health/education, private sector and public sector) with entries being independently audited against the Baldrige quality criteria. Many entries are posted each year by large health, defence, manufacturing and other organizations. However in 2006 only one organization in New Zealand (in any category) was assessed as meeting the strict criteria of the Baldrige framework – Christchurch City Council. The council participated in the award to gain an external assessment of how the organization is managed. At the time of announcing the award PESA (the organizers of the award) spokesman Errol Slyfield says that Christchurch City Council can be justifiably proud of its achievements: “It is

unusual for an organization to receive this award in its first year of entry. However the council has earned the accolade. It is a highly competent, mature organization with many strengths, including sophisticated leadership and a clear focus on customer interests. The development of organization-wide competencies, including advanced analysis, integration and learning and alignment, indicates organizational ability which is sought after by higher performing organisations internationally.”

Business Results

‘Business Results’ is the seventh and by far the most important set of criteria in the Malcolm Baldrige framework focusing on service, customer and financial results. Working backwards from this point will provide snapshot examples of performance management within Christchurch City Council, and so gain an insight into what the independent assessors saw, as well as an understanding what drives the organization’s business results.

Process Management

We start with criteria six, Process Management. A primary focus here is managing the organization’s key value creation processes. These are the high level processes that are essential to delivery of the LTCCP. Key value processes are determined by the Executive Team and Business Excellence Team (comprising 45 people who lead improvement plans under the seven Baldrige categories).

Human Resources

As an example for criteria five (Human Resources) in 2005 the council introduced a new methodology



used internationally to measure staff engagement and satisfaction. This looks at environment, health and safety, customer focus and communications. As cited, improving staff engagement is an objective within each organizational Plan on a Page.

Measurement, Analysis and Knowledge Management

The Plan on a Page / Balanced Scorecard is itself a powerful example of Christchurch City Council’s delivery to Baldrige criteria four (Measurement, Analysis and Knowledge Management).

Customer and Market Focus

As an example of criteria three, Customer and Market Focus, this council has developed a new approach to resident survey methodology in conjunction with international market research company, AC Neilsen. The survey tests resident satisfaction across the full range of services twice each year, probing into the root cause of very high or very low satisfaction responses. Note how ‘delight customers’ is an objective within the executive team’s strategy map and, as cited, instill customer-centric processes is an objective in every Christchurch City Council Strategy Map. That there is a close alignment between Christchurch’s performance focus for the Baldrige criteria (which is commonly known as Business Excellence in New Zealand) and for the scorecard is not coincidental, as Ryan explains. “Unlike a lot of management systems the Malcolm Baldrige business excellence model and the

Balanced Scorecard work well together,” says Ryan. “The first is a macro-level assessment of how an organization is managed, an overall health check that is pretty stringent. If something in our management is not working well the independent Business Excellence assessment will pick this up and provide feedback, which can then be built into the scorecard for action. The two are complementary if used this way to create a great feedback loop.” As an example of an improvement initative that has come out of the Baldrige assessment process, the council has launched a ‘better financial reporting’ programme that includes a revamp of budgeting and forecasting processes. It has become an objective in the Corporate Services scorecard.

Strategic Planning

Baldrige criteria 2 is strategic planning. As stressed throughout this case study, Christchurch City Council has a robust strategic planning process. The strategy development and deployment process ensures close alignment between short term operational plans with longer-term strategic objectives and outcomes for the city.

Leadership

Criteria one of the Baldrige framework is Leadership. It is of course the quality of leadership that transforms any performance management framework from a nice idea into a practical solution that delivers change. Ryan says that the leadership of the council has been instrumental in driving performance success, and is crucial for succeeding with the Balanced Scorecard.



Scorecard Success Factors

“There’s no point even thinking about putting a scorecard in place if you do not have the CEO on board,” he comments. “Having a committed CFO and head of HR is also critical as they have a hugely important role in creating an environment where people are encouraged to look at strategy using non-financial as well as financial information. These individuals, plus the executive team, must be actively looking for a game plan and a means to implement it, if the scorecard is to succeed.” He continues that it is also important that an organization has reached a stage of maturity where it is ready for the scorecard. “For instance the finance function must be ready to look at more than the financials and the HR department must be ready to think about more than administrative or personnel functions,” he says.

Key Performance Management Challenges

More broadly, and looking across his work for Christchurch, Brisbane and other public sector organizations, Ryan states that there are a number of key challenges in putting in place effective public sector performance management and measurement frameworks. He categorizes these as tradition and complexity.

Tradition

“Tradition can be a barrier because many in senior positions might not see the point of expending the effort to significantly improve performance,” he says. “Few public sector organizations fail in the commercial sense so there is not always a compelling requirement to figure out how to significantly improve performance,” he says. “To

put another way, where it is difficult to fail it is equally difficult to succeed, which often leads to inertia and an embracement of the status quo.” Overcoming these performance barriers, he says, is usually through the appointment of a new CEO with a clear performance agenda. “In this scenario those inert managers who favour the stays quo should realize that they are probably standing on a burning platform.”

Complexity

With regard to complexity he says that local authorities have to successfully deliver a lot of services that often conflict, such as protecting the environment while needing to grow the economy by encouraging development, which makes it difficult to prioritize performance. “It’s not like a company where you’re pitching for profit, which has a hard edge to it but is easy enough to understand as a prime directive,” he comments. “Some public sector organizations – local government being a notable example - have so many things that they’re seeking to deliver that they end up not knowing what they’re supposed to do first.” This ‘not knowing’ often leads to the creation of enormously complex Balanced Scorecards. “Too often in the public sector we see ‘spaghetti and meatballs’ Strategy Maps that try to capture everything the organization has to do,” says Ryan. “Such maps and accompanying scorecards become difficult to manage, confuse the organization and invariably run out steam.” Ryan states that a successful public sector scorecard should not have too many objectives (Christchurch averages 12 or less for each of Plan



on a Page). Moreover, in creating the scorecard managers should not be too focused on excessively documenting cause and effect relationships. “There is usually a many-to-many relationship in our strategies, which makes the documenting of cause and effect problematic,” he says. He provides the relationship between staff engagement and service delivery as one example. “This relationship alone could generate twenty cause and effect arrows on the Strategy Map, which would be confusing,” he says. “So we test for these cause and effect relationships when building the scorecards, but we don’t plaster dozens of cause

and effect arrows all over them when we communicate the maps.” Ryan concludes that there is a point in strategy development where a balance must be struck between the academic correctness of the game plan and the ability to communicate that plan. ”Finding that point – where the strategy has integrity but is also appealing and comprehensible to staff – is what makes for a good implementation,” he says.

Endnotes, References & Further Reading

Marr, Bernard (2010), “The Intelligent Company: Five Steps to Success with Evidence-Based

Management”, Wiley, Oxford.

Marr, Bernard (2009), Managing and Delivering Performance: How Government, Public Sector and Not-for-profit Organizations can Measure and Manage what Really Matters, Butterworth-Heinemann, Oxford.

Marr, Bernard (2006), “Strategic Performance Management”, Butterworth-Heinemann, Oxford

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Appendix: Illustrative Example of Scorecard

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