Peformance-Driven Government: Using Measures to Manage

Is performance measurement living up to its promise? When it comes to measuring the impact of government programs and services, its potential is now widely accepted. From monitoring the programs that governments run--such as social services--to measuring the performance of internal administrative functions--such as personnel management-- there are now plenty of governments that are at least asking the right questions about results.

But as the answers arrive, whether in the form of hard numbers or softer survey responses, another set of questions arises:

What should government leaders and managers do with the information?

What changes should be made in programs, policy or management practices in response to the data on their results?

How should budgets be modified?

And the ultimate question for all public officials, particularly those who are elected:

Do measuring and reporting on performance have any political consequences at all?

That is something that virtually all governments are still figuring out.

Listening to the speakers and the lively discussion sessions at Governing's annual management conference in Atlanta from September 22 to 24 made it clear that a number of governments have moved well beyond Performance Measurement 101--what to measure and how--and are now addressing the more advanced questions that arise once a basic performance measurement program has been put in place.

Governing Management '99: Performance-Driven Government was convened by Governing and sponsored by five corporations interested in working with government to improve the quality of government management and services: AMS, Cabletron, Lockheed Martin IMS, Siemens and United Water.

At Management '99, 340 top elected, appointed and career officials from 45 states and more than 100 cities and counties came together to share ideas, opinions and war stories about using measures to push government performance to new levels, whether in managing finance, taking advantage of information technology, improving infrastructure management, building better labor relations or focusing on what works in social services. Not incidentally, they also examined the question of the career consequences for elected, appointed and career officials of measuring performance.

REWARD OR RETRIBUTION?

A growing sense that the legislative budget process was an exercise in accountability-free allocation, rather than effective policy- and priority-setting, led the Louisiana legislature to embark five years ago on a performance measurement program, said Jerry Luke LeBlanc, chairman of the Louisiana House Appropriations Committee.

Under the traditional budget and appropriations process in Louisiana, said LeBlanc, legislators were little more than a pass-through mechanism for taxpayers' money. "The money would go to agencies, which would say they were going to spend it a certain way, but it ended up getting spent on all sorts of things," said LeBlanc. "It was Mardi Gras every year." By working with agencies to develop basic performance measures that each now reports on, LeBlanc said, the legislature has been able to get a much clearer picture of whether spending is having the intended impact.

A similar realization--that programs were being run without much hard information on what they were really accomplishing--inspired the Cuyahoga County Commission to insist that all departments in the Ohio locality measure their performance, said County Commissioner Jane Campbell. The county commission decided to phase in performance measurement: "We first focused on the department that we were getting the most complaints about--the county's child support enforcement agency," said Campbell.

As the county commission began asking more agencies to tie budget requests to performance measures, the response, not surprisingly, was mixed. "Some departments did well, others had a complete nervous breakdown," said Campbell. The key, both LeBlanc and Campbell agreed, was in working closely with the agencies themselves on coming up with core performance measures, rather than dictating what those measures should be.

There was no question, they said, that performance measurement is meaningful only if it is tied directly to the budget process. "We had a separate office of performance measurement when I was first elected, and it wasn't doing much meaningful work. We eliminated it and put that function in the budget office," said Campbell.

As for the impact of performance measurement on budgeting, there have been some immediate and unexpected payoffs besides allowing elected officials to get a better handle on what they're getting for the taxpayers' money, said LeBlanc. "It has cut way down on member amendments during the appropriations process because every one of them is looked at in light of performance measures." And LeBlanc is convinced that performance-based budgeting pays off politically. He contends that constituent satisfaction with the results of Louisiana's new performance budgeting effort is, in large part, responsible for the fact that 40 percent of the members of the legislature were unopposed in the 1999 general election.

PERFORMANCE POLITICS

Any politician who doesn't understand that performance is central to electability is probably not going to be around for long, said Georgia Governor Roy Barnes, the conference keynote speaker. Barnes believes that a new day has dawned for elected officials: "Performance is the only thing that matters."

But good politicians must have an instinct for what should be measured and how to use those measures, Barnes said. Most politicians succeed or fail over "kitchen table" issues--topics that are discussed over breakfast and dinner, such as taxes, the cost of day care or the length of the daily commute. And in today's sound-bite world, "it is those measures that you can turn into a message," said Barnes.

His prime example was the radical new approach to land use planning and development being launched in the Atlanta metropolitan region. In essence, it makes the governor the land use planning czar for the region, with the power to cancel both public highway and private development projects, and to order the expansion of mass transit. Barnes moved the change through the legislature based on a measurement message that was straightforward: Brutal daily traffic jams threatened to throttle the area's booming economy and destroy its quality of life. Period. "If you ignore performance and don't use the tools you have to reshape government to meet the demands of a new world and a new economy, you will lose," Barnes said.

Barnes' admonition set the stage for the wide variety of sessions that followed, each of which highlighted how various governments are responding to the new world that Barnes described, finding creative ways to use measurement to improve performance.

TURNING PERFORMANCE INTO POLICY

Among the recognized leaders in using performance data to meet the new demands of governing is Charlotte, North Carolina, a city that has made significant progress in using data on results not only to improve the way government does business but also to communicate better with citizens about what government actually does, day in and day out.

Performance measures in a vacuum aren't much use, said Pam Syfert, Charlotte's city manager, who explained how Charlotte links its strategic plans to on-the-ground results.

The first step, said Syfert, is to establish the key goals of the city's government, which, in Charlotte's case, were community safety, transportation, economic development, downtown revitalization and better internal administration. Performance measures then flow from those core areas of action, and the results of the measures are incorporated in information provided to citizens in a clear "report card" format.

Using data on results to guide government management practices has proved to be successful in states and localities across the nation. Few jurisdictions have, as of yet, succeeded at using results data to shape budgets. In Virginia, one of the leaders in performance-based budgeting, considerable thought has been given to focusing all the major budget players on that connection, said Lee Harizanoff, the state's strategic planning and performance coordinator.

In preparing its biennial budget, the state has come up with a straightforward and effective way to accomplish that connection. Every two years, a "strategic briefing" is held for each agency. At these formal meetings, the agency head and chief financial officer, the department secretary and chief financial officer, and a representative of the governor's office sit together to review the agency's plans and progress. Each agency uses three to five core performance measures to establish budget benchmarks and gauge progress.

MANAGING THE BASICS

Despite all the discussion of tying performance measures to the budget process, it is at the basic level of program management that performance measures have had the most impact to date. Whether in moving individuals from welfare to work or expanding a utility's capacity to provide clean water, a new focus on performance is transforming not only the way government operates but also the way it organizes.

Performance measurement veteran and former Cincinnati city manager Jerry Newfarmer had some advice on how to introduce results-based governance to an office, agency or government:

• Don't go overboard. Fewer indicators reflecting core goals are better than a grab bag of measures chosen because relevant data exist.
• Include those who will be evaluated by performance measures in the discussion of what measures will be used and how.
• Discard measures that don't tell you how you're doing.
• Tie measures to management.

In Florida's sweeping experiment in reinventing welfare, for example, the ability to measure results has been critical to the state's interest in supporting local experimentation with new ways of delivering services, said Phyllis Busansky, executive director of the state's Work and Gain Economic Self-Sufficiency--or WAGES--Board, which oversees the state's welfare program.

Essentially, the WAGES Board allows localities to choose their service providers and design their own welfare-to-work programs, asking only that localities provide detailed information on results so that the WAGES Board can evaluate and compare performance.

In a similar vein, but in a completely different program area, Keith Pyron, chief engineer of the Bexar Metropolitan Water District in San Antonio, Texas, explained how measuring bottom-line performance has revolutionized the world of infrastructure contracting. With a new focus on bottom-line results, state and local governments are increasingly moving away from segregated contracts that divide project design, construction and operation into separate areas of negotiation. Rather, they're finding considerable efficiency in single-source, performance-based "design-build-operate" contracts that allow one company to design, build and operate a plant.

TURNING TO TECHNOLOGY

If there has been one well-traveled route to more effective government in the past few years, it has been the path paved by technology. Computers and the Internet have opened up a vast new world of more efficient government operations and brought far more players into the process.

Whether for researching driving records or perusing the offerings of the state park system, GeorgiaNet has become one of the hottest Web sites in the Peach State. According to Tom Bostick, executive director of GeorgiaNet, the state's Web site offers online information 24 hours a day, seven days a week on everything from pending legislation to how to register as a vendor to the state, drastically reducing the need for state employees to answer phones or fill out paper forms. The state is even taking care of some basic billing and payment processes through secure Web servers. At the same time, the state is generating millions of dollars in revenue each year by selling information over the Web, including corporate and driving records.

One of the bolder money-saving Web moves was the one made recently by Pittsburgh. The city now does some municipal bond sales via the Internet. By going the e-route, Pittsburgh has saved hundreds of thousands of dollars, said Ellen M. McLean, the city's director of budget and finance, and opened up its bond sales to a whole new group of financial players. The city is floating multimillion-dollar bond sales on the Internet in smaller chunks than traditionally offered. Breaking bond sales into more bite-sized pieces has brought greater competition to the bond sales brokerage business. Pittsburgh officials plan to take the idea one step further, bypassing brokers altogether to allow large institutional investors to buy bonds directly from the city.

As tempting as technology can be, however, going the e-commerce route isn't necessarily going to save governments money. That's why any government interested in using the Internet to streamline some process should first analyze whether the shift makes financial sense. Describing how to use activity-based costing in this analysis process, J.D. Williams, Idaho's controller, and William Kilmartin, a former Massachusetts comptroller, outlined the basics for apportioning the costs of everything from cutting checks to recruiting employees to purchasing.

"As you get into electronic commerce, you have to do your homework," said Kilmartin. "And that's where activity-based costing comes in." A detailed analysis of work flow that costs out each step is critical to planning any move to the Web, he said. There have been some instances when, after doing such an analysis, Idaho determined that going electronic wasn't worth it, Williams added.

Finally, though, there is an even more basic consideration when it comes to technology and government services: Is your government ready to use technology to reshape how it does business? "It's a huge management dimension," said Aldona Valicenti, chief information officer for Kentucky. Among her suggestions:

• Designate an IT official for your government and provide that person with broad power to analyze and support (or kill) IT projects.
• Look at technology from an enterprise-wide, cross-jurisdictional perspective.
• Engage front-line employees early in IT project design.

GOOD PEOPLE, GOOD PERFORMANCE

As much as technology can assist government to improve performance, government service is a people-driven, labor-intensive business. Government's performance is ultimately as good or as bad as the performance of the person on the front line. And so finding people up to the challenge of public service, figuring out how to provide them with regular, meaningful feedback about performance, and maintaining positive labor relations are critical to government's ability to deliver services.

Wisconsin is a leader in finding and keeping good state employees. Bob Lavigna, head of merit recruitment and selection, described a host of ways that Wisconsin has come up with to compete with the private sector for talented staff. Among them is a vastly streamlined process for hiring, particularly in key areas of need such as IT, civil engineering and health care. In addition, the state now gives personnel managers much more flexibility in offering better compensation packages. Together, said Lavigna, the two new approaches to hiring have allowed Wisconsin to move quickly and persuasively when good candidates express an interest in coming to work for the state.

While states and localities may be managing civil service more intelligently these days, the broader issue of labor relations continues to be a dicey one in many places. It is a matter that can have a direct impact on both individual and government performance. Thus, after years of miserable labor relations, labor and management in Wisconsin decided to try something new, said Marty Beil, executive director of Council 24 of the American Federation of State, County and Municipal Employees, and Peter Fox, secretary of the Wisconsin Department of Employment Relations. "Anything would have been better than the old way of doing business," said Beil. "Everything that management did, we disputed."

A focus on consensus bargaining--that is, on areas of mutual gain rather than areas of surefire division--has transformed labor relations in Wisconsin, added Fox. As a result, the last contract was completed before the deadline. Better labor relations, said Beil, has led to all-around better performance, as both labor and management now concentrate on getting the work of government done, instead of fighting over contracts and work conditions.

RISKS WORTH TAKING

As is frequently the case, the improvements in places such as Wisconsin derive from enlightened leadership. Whether performance improvements are based on using technology better, managing administration more effectively or finding and nurturing top- performing public employees, how government operates reflects who is leading it, said Camille Cates Barnett, a veteran city manager and former chief management officer for Washington, D.C.

Good leaders, whether at the top echelons of government or on the front line, have three qualities in common, said Barnett: They set a direction, they empower people and they think systemically. And they are always trying to reform how government does business. "If you're not reforming, you're not leading," said Barnett.

As for the risks involved in trying to do business in a new way-- especially in areas where issues of turf, special interests, power and money inevitably get in the way--Barnett suggested keeping two things in mind: "You can't control everything, and no job is permanent."

That's life in the precarious world of change agents, said Barnett, who has more than her fair share of bruises to show for her all-out approach to public-sector management. "But ultimately," said Barnett, "the rewards are always greater than the risks."