SECTION 5: PERFORMANCE MEASUREMENT AND PERFORMANCE MANAGEMENT
Section introduction
5.1 This section considers the research questions which relate to organisational performance measurement. How and why are certain performance management measures and indicators chosen developed and collated? The section reviews the development of performance indicators and evaluates their contribution to organisational performance management in a government context.
Performance indicators and organisational performance management
5.2 In the 1980s, according to Pollitt (1986:155-170), UK commentators were concerned that there was too much emphasis on the 'triumvirate of virtue: economy, effectiveness and efficiency' in performance indicators ( PIs). Economy, on its own, is a very limited concept for providing guidance to managers. Gray and Jenkins et al. (1985) suspected that, at this time, there was a drive to minimise inputs almost regardless of outputs.
5.3 Carter (1991) identified weaknesses in existing performance assessment systems in that indicators tended to be used as 'dials' instead of using them as 'tin openers' (where the indicator prompts investigation prior to the initiation of action) and this led to deficiencies in the design, implementation and utilisation of information from the existing PI systems. Collectively, the academic writers were concerned that performance indicators had become tools of government and senior managers in that they were 'top-down', prescriptive, value laden, input and process focused, and predominantly economy and efficiency-led. Kanter and Summers (1987) urge non-profit managers to try to set objectives and assess results to determine if they are indeed 'doing well while doing good'. Tichelar (1998) identifies that many performance assessment systems still contain a substantial number of indicators that public sector organisations must utilise and consequently report. The audiences for such reports include: government; funding agencies; auditing agencies; client groups; stakeholders; and the general public.
5.4 McKevitt and Lawton (1996:49-54), conclude that performance measurement will fail unless there is a participative approach designed to promote ownership at all levels of the organisation. Kravchuk and Schack (1996) developed a set of design principles, based on US experience, which incorporate good practice in managing change and a concern for clients and other stakeholders, these are as follows:
- Formulate a clear, coherent mission, strategy and objectives.
- Develop an explicit measurement strategy.
- Involve key users in the design and development phase.
- Rationalise operations as a prelude to measurement.
- Develop multiple sets of measures for multiple users, as necessary.
- Consider the clients, customers and stakeholders throughout the process
- Provide each user with sufficient detail for a clear picture of performance.
- Periodically review and revise the measurement system.
- Take account of past, current and potential future complexities.
- Avoid excessive aggregation of information.
5.5 Key decision takers should avoid using measures as a substitute for expert knowledge about, or direct management of programmes. Measures are better placed in a management by exception framework, where they are regarded as indicators that will serve to signal the need for further investigation (Carter's (1991) 'tin-openers [see above]). Such an approach promotes learning, adaptation and improvement.
Observations from literature
5.6 The themes emerging from the implementation studies are many and varied. These themes have changed over time to reflect the changing context of public management and developing experiences of performance indicators in action. There remains a concern for input, process and output but there is a need to further develop a concern for outcome.
5.7 If organisations consider change management theory, they are less likely to encounter opposition from within the organisation. This requires a participative 'bottom-up' approach where the system develops from within the organisation but is supported from the top and organisational members feel a sense of ownership of performance measures. Criticisms also relate to the over-emphasis on performance indicators as post-controls in that they are used for reporting past performance. There is insufficient use of performance indicators for concurrent controls and for planning purposes (pre-control).
5.8 A study by the Social Market Foundation (2005) identifies recurring criticisms of performance targets:
- There are to many targets
- Targets are too rigid and undermine the morale of staff
- Targets have perverse unintended consequences
- It is not always clear who is responsible for a target
- The data are not always credible
(Social Market Foundation, 2005:19)
5.9 However the study defends the use of targets in government:
Targets are a useful tool in the armoury of government which needs to ensure that public money is well spent and that important outcomes are realised.
(Social Market Foundation, 2005:25)
5.10 The study goes on to argue in favour of the retention of targets in government as they have the capacity to give an organisation focus. They can align different bodies which otherwise might be reluctant to co-operate. They can embody the aspirations and priorities of government. They can provide a transparent framework for holding government to account. They provide useful information for citizens and other stakeholders.
5.11 The aim of performance measurement and target setting by government is to improve the quality, performance and accountability of public services such as health and education. But do targets achieve this aim? To evaluate the extent to which targets are met, and any unforeseen adverse consequences of target setting, requires robust, comprehensive performance measures which cover the full range of services being delivered. Otherwise, providers may concentrate only on areas that are measured to the exclusion of others.
Key points
- Performance indicators in the past tended to focus on economy and efficiency and to a lesser extent effectiveness.
- Performance indicators have been used extensively for reporting performance (post-control). There should be greater use of performance indicators for the purpose of planning (pre-control) and monitoring (concurrent control) in systems of organisational performance management.
- Performance indicators should be used as 'dials' (communicating performance status) and 'tin-openers' (identifying factors which require further investigation to clarify causes and consequences).
- Performance indicators in contemporary organisational performance management should incorporate performance outcomes.
- Performance indicators systems should incorporate the performance information required by external stakeholders as well as information required internally by management and organisational members.
- Performance indicators should be transparent and understandable to those with an interest in the performance of the organisation.