Section 6: Performance Management Systems
Are statistically driven performance management systems a fad or a public management reform here to stay?
How do performance management systems position organizations, their structures, cultures, and employees, to reach milestones.
Why Do Managers User Performance Information?
Moynihan, D.P. and Pandey, S.K. (2010). “The Big Question for Performance Management: Why do Managers Use Performance Information?” Journal of Public Administration Research and Theory, 20(4): 849‐866.
Author: Farrior, Cheri Nicole; Editor: Rosa, Adelaide Lee
Can government activity reduce the performance deficit? Significant concerns have long been raised that government organizations are unresponsive, inflexible, and inefficient, that private enterprises are more capable of more efficient operation. In response to these concerns, government reforms require agencies to track and measure strategic goals, targets, and achievements. As a result of this reform process, there exists more access to performance information than ever before. Managers use performance information to study the successes and failures of an organization. It also enforces goal-orientated decisions that the public expects from bureaucrats. A challenge of this process is how to use information from performance evaluation systems; information alone without context has little meaning.
"Research on performance information has linked the following variables to be positively associated with performance information use: administrative stability,** internal requirements** and lower levels of government, inclusion of organizational members in performance management processes, and chief executive power" (Moynihan, Pandy). Efforts by the central **agency to control** the policy agenda and measurement challenges are both negatively associated with effective use of performance information. Significant evidence shows public employee behavior can benefit the organization. Employees that have a high level of public service motivation are more likely to be committed to their job and experience greater job satisfaction, as they care more about achieving organizational goals. Employees are more likely to use performance information when rewards, such as pay and promotions, are linked to goal achievement. Leaders who have more task-specific responsibilities are more likely to use performance information than more senior leaders, because senior leaders spend a lot more of their time dealing with things outside of management. The supply-side approach to performance information suggests that available performance information data is more likely to be used when tied to management systems. The contrary, a demand-side approach, states that access to data is not enough, because managers must actually want to use the data. Mangers who are in support of the development of the organization are more likely to use performance information data than those who do not buy into the goals or vision. Furthermore, if managers have flexibility they are more likely to use performance information to find opportunities for innovation. Over the years the role of budget officials has changed, becoming more about controlling performance, measuring technical efficiency, and overseeing allocation of resources.
If citizens and stakeholders support performance information use then it is more likely to be implemented. There is an assumption that more participatory governments would feel more pressured to use performance data. Professional organizations in the public sector likewise encourage the use of performance management systems.
The survey was administered to senior managers, general managers, and field managers who head key departments. The majority of the participants were older white men who were highly educated with high salaries. The survey measured the use of performance information to make decisions, noting the regularity and consistency of use.
Results & Discussion
Results show that public service motivation and performance information use are positively correlated, but there is not convincing evidence that public service motivation fosters higher performance. Results also imply that performance systems should focus on encouraging a sense of public service, not just rewarding expectations; performance information use correlates with altruism rather than self-interest. Due to the strong correlation between individual reward and performance data, incentives are more likely to encourage performance information use. Greater access to performance management systems likewise increases the frequency of use. When an organization is more open to taking risks, they are more likely to have reported performance information use. Organizations with greater managerial flexibility also display increased use of performance information. The results neither accept nor reject the variable tested, instead calling for additional testing to filter out several environmental variables that affect performance information use.
Use of Incentives in Performance Management Systems
Heinrich, C.H. (2010). “Incentives and Their Dynamics in Public Sector Performance Management Systems.” Journal of Policy Analysis and Management, 29(1): 183‐208.
Author: Checksfield, Molly Wentworth; Editor: Swartwood, Hilary Ann
Heinrich and Marschke illustrate the complexities of measuring performance through a variety of examples in the public sector. The authors explore the history of performance management, and the challenges in determining how to measure performance based on organizational structure and how well performance indicators reflect the true values of the organization.
Early performance measurement was based on scientific management principals, and has since transitioned into a stricter focus on outcomes in complex organizational settings. As performance measures have changed over the years, the types of measurement used within the public sector have changed as well. Instead of focusing solely on the descriptions of structures within the scientific model, we now see a greater emphasis on studying the dynamics of systems and the incentives that guide employees to work towards organizational goals.
Performance can be measured through the use of incentives to motivate employees to reach the goals set by their organization. The definition of performance within an organization is largely based on the values of that organization, as well as the type of motivation employees possess (intrinsic/extrinsic). An employee who is well matched with an organization with similar values may need less incentive to reach organizational goals; suggesting that some employees may respond more directly to employers’ incentives.
Employers (principals) should determine which performance indicators to use within the context of their organizations, as well as how to measure performance before they begin assessing their employees. While some employees respond to incentives in the form of monetary compensation, others may respond to more value-added incentives. It is necessary for employers to understand the preferences of the employees in order to maximize worker output.
The principal-agent model measures organizational structures as well as the features of performance management through the lens of resulting incentives. Heinrich and Marschke suggest that a combination of objective and subjective assessments provide a more accurate depiction of employee effort. Determining how to best quantify subjective measurements remains a barrier for measurement practices.
Not all organizations should be treated alike- incentives should only be used in instances in which employees will respond. Some actions may affect performance differently than they affect value- a point that is crucial to understand when measuring performance and incentives. Intrinsically motivated individuals can be assigned tasks that specifically target their skills and value where they act as stewards of the goals of the organization, while others who are extrinsically motivated can be assigned tasks that are more easily measured.
One of the loopholes in performance management systems is the ability for employers to game the system. This concept of “gaming” results in lower program impacts- controlling the performance measure could have seemingly positive effects for the organization, but produce an inaccurate depiction of program growth. Another potential barrier for success is when an organization sets “benchmarked targets”, where too much emphasis is placed on performance without analyzing the process behind the progress within the organization.
In conclusion, the process by which an organization decides to measure performance should be based on that organization’s goals as well as the employee’s extrinsic/intrinsic motivations related to their work. Before performance indicators are measured, principals should have a foundation of knowledge about the type of measurement being used so that the effectiveness of the measurement is not distorted by the neglect of the principal. Each employer’s situation is unique- and a variety of factors should be taken into consideration when implementing performance management systems.
Integrating Performance Management and Strategic Planning
Collins, J., & Hansen, M. T. (2011). Great by Choice: Uncertainty, Chaos and Luck-Why some thrive despite them all. Random House, CH 6 – Specific, Methodological, Consistent (SMaC).
Author: Fantigrossi, Steven Marc
A SMaC recipe is a specific, yet durable set of operating practices that allow organizations to replicate success. The acronym “SMaC” stands for specific, methodical, and consistent.
SMaC recipes are long-term strategic guides that are intended to last many years. Through changing economic situations, SMaC recipes keep organizations on track towards their stated goals and allow them to operate at a high level despite uncertainty. Companies that follow through with SMaC practices are more successful than their non-SMaCing counterparts.
In an constantly changing world, organizations often incorrectly believe that they must respond to every change, or they will fall behind. As Collins points out, “most change is just noise and requires no fundamental change in ourselves.” Organizations must also commit to following their recipe and only amending it when sufficient empirical evidence suggests a change in course of action.
Former CEO of Southwest Airlines, Howard Putnam, created a specific and simple SMaC recipe for the company that was only changed 20 percent in 25 years. It made Southwest successful by focusing on providing short, low-fare, and quick service to customers traveling in Texas and kept the company out of the business of food service and mail delivery. In 1997, Steve Jobs turned around Apple by bringing the company back to its original SMaC recipe that it had abandoned after he was ousted more than ten years earlier.
The United State’s Constitution is another example of striking the proper balance between addressing change and adhering to core principles.The Constitution’s framework of clearly articulated principles provided the basis for which the government operates. The founders understood two important things as human beings: we are unable to predict the future and we want to immediately respond to change. The lengthy and difficult amendment process was created to allow the Constitution to be changed, but only after the nation had thoroughly debated the suggested change.
SMaC recipes are articulated through ten key statements that serve as do’s and don’ts for Managers to follow. SMaC principles keep organizations doing what they’re good at and prevent them from overextending themselves. The SMaC recipe can be utilized by leaders in organization to set clear goals for the organization and plan strategically.
Performance Management in Practice Part 1
Collins, J., & Hansen, M. T. (2011). Great by Choice: Uncertainty, Chaos and Luck-Why some thrive despite them all. Random House, CH3 – The 20 Mile March.
Author: Hanson, Keely; Editor: Uk, Bolary
The 20 Mile March is a performance management system designed to position an organization to reach milestones by setting a performance metric to be met on a consistent basis over a long period of time to achieve sustained growth. It imposes order amidst inconsistency by operating as a strategic mechanism that builds organizational confidence, especially in times of uncertainty. Setting performance benchmarks to drive consistent progress into an organization’s culture, no matter if the conditions are good or bad. In other words, this promotes a culture of commitment to high performance in difficult conditions and holding back in good conditions. This mechanism can keep an organization’s performance on a right and controllable track and solve problems by taking corrective actions along the way. This approach depends on fanatic discipline to achieve systematic progress with a no excuses approach. It can be leveraged to navigate turbulence, especially in an out-of-control environment.
There are seven key distinguishing factors that make a good 20 Mile March:
- Clear performance markers: a. Delineate a lower bound of acceptable achievement. b. Must be challenging to achieve in difficult times, but not impossible.
- Self-imposed constraints: a. Honoring an upper bound that delineates boundaries of overextension in good conditions. b. Constraints should complicate pressure of achieving more or at higher levels.
- Appropriate to specific enterprise: a. Tailored to the respective organization and its environment.
- Largely within the team or company’s control to achieve: a. Based on tangible goals that do not require luck.
- A proper timeframe: a. Timeline long enough to retain power, and brief enough to control for variability outside of control
- Designed and self-imposed: a. Internally-designed and imposed. b. Reflects clarity and rigor specific to underlying performance drivers for that enterprise.
- Achieved with high consistency: a. “March” must be achieved year after year. b. Must be achieved as a result of fanatic discipline.
The 20 Mile March is not limited to the financial sector. It can be implemented across organizational sectors as long as it has the aforementioned characteristics that make a 20 Mile March successful. The absence of a 20 Mile March may make an organization more vulnerable to turbulence and uncertainty. Adhering to the 20 Mile March system fosters organizational confidence because it demonstrates performance is determined via actions rather than as a result of conditions. The more volatile the environment, the greater the need for a 20 Mile March. It acts as an internal safeguard to being overextended when calamity hits. There are some questions that arise in regard to the 20 Mile March approach. For example, how do you balance fanatic discipline and adherence to a specific performance metric without undermining innovation and adaptation? This should be a consideration when implementing the 20 Mile March as a performance management system. However, if there is a need to establish organizational confidence, delineate boundaries for sustainable success, and achieve consistent results, then the 20 Mile March is a viable performance management approach.
Performance Management in Practice Part 2
Hatry, H., and Davies, E. (2011). A Guide to Using Data‐Driven Performance Reviews. IBM Center for the Business of Government.
Author: Steele, Samantha E; Editor: Wohlenberg, Danielle Irene
Businesses and government alike are seeking ways to improve efficiency and effectiveness in order to to better serve their constituents. Performance measurement has become a familiar tool to achieve just that. This summary will identify and explain three important concerns for implementing a performance system and touch on what and where stakeholders should be involved in that implementation process.
So what is a data-driven performance system? It is a strategy for leadership, specifically for federal executives, so that they can improve efficiency and effectiveness within their sector. This strategy implements goal driven management, facilitated by data analysis and regular reviews on performance indicators. These tactics are not simply a fad, and are proving to be a management reform that is here to stay; in fact, it has even started to become a requirement for some government agencies. The Government Performance and Results Act (GRPA) Modernization Act established in 2010 currently requires that each federal agency: set priority goals, identify a goal leader, review progress on goals, and then publically report that progress on a quarterly basis.
Hatery and Davies created a “how to” guide for implementing and operating data-driven performance reviews. These authors have identified three vital considerations to a functional performance system; they are: interested and engaged leadership, timely performance measures, and staff that has the capability to analyze measures prior to performance review meetings. The first consideration lays in leadership; it is essential that leaders are not only interested in supporting this strategy but have the willingness to attend and participate in regular meetings. Second, performance measures must be comprised of valid, accurate data on program outcomes that have the ability to promote meaningful discussion. Lastly, staff must be able to support their leadership by examining data and providing thoughtful advice to contribute in meetings.
The implementation activities should include a number of vital persons in order to produce an impactful data-driven performance system. Hatery and Davies suggest that heads of all reporting units be included in the start-up activities. Specifically, they should be directly involved in developing the approach of the system, clarifying goals, aid in creating follow-up protocol after each meeting, determining staff and resources required, and it is especially important that they help to choose performance indicators. It is also necessary to consider the stakeholders in a data-driven management performance system. In a federal agency the stakeholders include the public, other federal agencies, as well as the state and local government. Hatery and Davies suggest that these stakeholders not be allowed in performance review meetings initially, but that they be phased in over time.
A number of successful programs have implemented data-driven performance systems and found that services have improved, and that associated costs have gone down. Examples include the CompStat in New York City, and the FDA-TRACK. The CompStat in New York City has as of 2011, been the most studied performance review program, andit has rendered a “substantial contribution to reducing crime in NYC”. The FDA-TRACK performance management system was designed in 2009 and after its implementation in 2010, individuals noted that the system provided opportunities for more preventative measures. Regular meetings allowed for the discussion of possible hindrances to performance and thereby allowed for quicker solutions.
In order to achieve a successful implementation of a data-driven performance system it is necessary to have: interested and engaged leadership, timely performance measures, and staff that has the capability to analyze measures prior to performance review meetings. Additionally, a successful implementation involves all of the heads of reporting units. The stakeholders for a performance system of a federal agency include the public, other federal agencies, as well as the state and local government. Each of these stakeholders should be allowed to observe performance review meetings once a firm system has been established. Hatery and Davies have illustrated how to reach important milestones with a performance management system by describing what is necessary of employees, and the type of structure and culture to propagate within an organization.