The public sector does not have easy-to-measure goals such as maximising profits. This makes it all the more important that public bodies have effective performance management processes. John Thornton provides a route map
As the economy pushes deeper into uncharted waters, one of the few certainties is that there will be a lot less money available over the next few years to fund and sustain public services. In addition to making some hard choices, all public sector organisations will be forced to produce even more with minimal increases, or even cuts, in resources. Dramatic improvements in performance management will be necessary to meet these new challenges.
In theory, performance management is relatively simple – it is about understanding and managing the relationship between ‘resources consumed’, ‘activity’ and ‘outcomes’. This is fundamental to managing any successful organisation. But the reality is that many organisations in the public and private sectors struggle to demonstrate, manage and align these seemingly simple relationships. It is also clear that the ‘business’ of government and providing public services is much more complex than the relatively simple business models that are often used to illustrate performance management.
Government and public service organisations generally do not have simple-to-measure and easy-to-communicate goals such as ‘profit maximisation’. Their objectives are more complex and the processes required to produce them usually involve multiple teams and agencies, which in turn makes it difficult to clearly link the cost of resources used with the results.
Conversely, it is these complexities that make effective performance management even more important for public sector bodies. However, a recent study by software company Oracle concluded that, in general, the public sector is not as good at these vital activities as other industries.
In a separate Oracle study, I looked into these issues in more detail. There is a long history of performance measurement and performance management-related initiatives within the UK public sector. As a result, there is a good understanding of the basics; there are existing and interlocking performance management frameworks in place; and there are examples of emerging good practice on which to build. There is also considerable scope for improvement and very wide variations in the standards between departments, sectors, executive agencies and business units.
To help understand and map the different levels of progress, a relatively simple ‘maturity’ model has been developed. This recognises that improving performance management is a journey and that different organisations and different parts of the same organisation are often operating at different levels of maturity and sophistication.
The model identifies four levels of maturity: unconsciously poor; consciously poor; consciously competent; and transformational. The unconsciously poor organisation often operates with a silo approach, with culturally disconnected divisions and business units each pursuing their own objectives. This often leads to duplication and overlapping of the work of other departments and units. Information is regarded as ‘power’ and is shared sparingly, resulting in low levels of trust and communication between units. The processes for decision-making and creating action are obscure, and there is little accountability for achievement and poor performance. This type of organisation might well ask why it needs better performance information.
The consciously poor organisation recognises that it has a performance management problem. It will often ‘centralise’ its control systems and structures to improve ‘command and control’ and will begin to improve performance by setting targets and introducing performance measurement and monitoring. The overly controlling nature of the systems and processes, however, means that there are relatively low levels of trust, there are few incentives to innovate and communication is relatively mechanical. In this environment, performance information is seen primarily as a means of reporting upwards to demonstrate performance against agreed targets.
The consciously competent organisation usually operates with a devolved structure. It uses common core processes and systems to strike a balance between encouraging innovation and ensuring compliance with corporate plans and priorities. It uses information to plan and drive its own performance and designs its processes to automatically generate the information that it needs. This results in good levels of trust, accountability and transparency.
The transformational organisation strives to achieve management excellence. Collaboration is the norm for internal units. It collaborates with a range of partners, it uses and shares internal and external information sources with its partner organisations and understands the needs and aspirations of those it is serving. There is a strong performance management culture and the whole organisation is forward-looking and agile, with high levels of innovation, trust and accountability.
As we prepare for the tempestuous times ahead, it might be useful to think of performance management as planning and navigating a voyage to a distant land by sailing ship. Good planning is essential. You need to be clear about how you will measure progress and you will have to adjust your course to meet changing circumstances in terms of tides and weather. You must convince the passengers, the crew and those funding the journey about the benefits of the voyage.
You must also ensure that every member of the crew understands their contribution to each stage of the journey and what to do when you encounter storms and problems. The voyage then becomes an ongoing series of adjustments to the original plan, refining the objectives as you progress and attaining a better understanding of how to overcome the difficulties that you will inevitably encounter. Ideally, you should also become more efficient as the crew understands how to overcome inefficient working practices.
The challenge for government is that the public sector cannot be compared to a single ship. It is a fleet of different vessels, each with their own objectives, with captains and crews of varying quality. The result is that some get in the way of others, some duplicate activities and some might even go in the wrong direction. The overall aim of performance management is to create a flotilla of organisations working co-operatively, on different tasks, with complementary and shared strategic objectives, and the freedom to adapt and innovate within that framework to meet local needs.
This means that all public sector bodies must now begin to think in terms of performance management networks. Confronting the so-called ‘wicked issues’ – crime, drugs, health care, climate change and national security – requires a much more collaborative approach to performance management. Increasingly, government departments, agencies, local authorities, health trusts, the third sector and the private sector will be required to work in a wide variety of collaborative and flexible relationships, sharing information, budgets and people.
Unfortunately, most performance management methods do not reflect this new reality and focus on optimising the performance of the individual organisation. Public Service Agreements, Local Area Agreements, Comprehensive Area Assessments and the like provide recognition of the difficulties and a starting point for addressing them. Part of the challenge for all of us will be developing the skills to operate in this new environment.
Every organisation needs to build a performance management culture that focuses on agreed priorities. There also needs to be a ‘golden thread’ linking organisational priorities, informed by national and local priorities, through to individuals’ performance objectives and demonstrable achievement.
In earlier times, it would have been extremely difficult to implement and operate responsive, timely and accurate performance management systems capable of operating across government. However, the availability of today’s performance management and business intelligence tools make this possible and manageable at reasonable cost. Are you ready for the challenges of the voyage ahead?
John Thornton is an independent adviser and writer on business transformation, financial management and innovation and is executive director of e-ssential Resources. You can find the Oracle paper at: www.oracle.com/global/uk/performance-management
