33 – Developing an organisational performance measurement system. Some ideas.

Posted by Lancing Farrell                                                                                     820 words

I have been thumbing through ‘Improving Performance – How to Manage the White Space on the Organisation Chart’ by Geary A. Rummler and Alan P. Brache, in particular the chapter about performance measurement. In it they describe measurement is the single greatest determinant of an organisation’s effectiveness as a system, and as the primary tool for ‘communicating direction, establishing accountability, defining roles, allocating resources, monitoring/evaluating performance, and taking improvement action’.

I haven’t seen a local government that has actively used performance measurement this way. Instead, it tends to be driven by external accountability requirements. We use the performance measurement that we do to convince others that we are doing what we should. Rummler and Brache also talk about the fact that most organisations developing a performance measurement system start with an ‘almost overwhelming network of financial measures, and measures driven by past problems, shifting emphases of new managers, and new corporate programs for quality or customer service’.   Any council that has attempted to put together a business performance reporting framework will have found this. Across the organisation, we measure so many activities, but usually we measure things that don’t help to manage or improve performance.

I think the main point is that measures drive behaviours (and lack of measures drive behaviours!) and unless the measures are focussed on business outcomes, they will drive purposeless (non-value adding) and potentially conflicting behaviours. To help sort this out, Rummler and Brache have developed a really simple and doable process that can be used to develop measures and create a performance measurement system in local government. It has four steps:

  1. Identify the most significant outputs of the organisation at the organisation level (i.e. the corporate goals and strategies, objectives for relationships with the community and stakeholders, and the functional structure of the organisation), process level (i.e. the cross-functional processes where work gets done to deliver services), and job performance level (i.e. the individuals performing the work).
  2. Identify the ‘critical dimensions’ of performance for each of these outputs (these must be derived from customer expectations and the realities of business needs/limits)
  3. Develop measures for each critical dimension by asking ‘what indicators will tell us if our customers find our service … ( insert the critical dimension – e.g. convenient, timely, accessible, etc.)?
  4. Develop standards for each measure that are specific about the performance expectation.

This approach is simple but quite detailed and suited to a service organisation as diverse as local government. If a services is defined as an end-to-end process or set of processes producing common output (or value), this approach enables each service set to be managed for the performance relevant to its customers.

A complementary performance measurement system that focuses on the organisation level is proposed by Mark H. Moore. His ‘Public Value Scorecard’ has been designed to measure achievement of organisational mission. He believes the mission should describe the value that the organisation will create for the community using the resources and authority given to it by the community. If you follow John Seddon, this would translate to the ‘purpose’ of the organisation. Moore focuses on measurement of outputs and outcomes that ‘alter social conditions in collectively desired directions’, rather than simple measures of inputs, processes and outputs.

The Public Value Scorecard has three elements. A ‘public value account’, which matches the use of community assets and the associated costs, with the achievement of collectively valued social outcomes; a ‘legitimacy and support’ scorecard (the external demands for accountability in the authorising environment of the organisation) and an ‘operational capacity’ scorecard (the ‘value chain’ that links the inputs of public resources into a production system that produces transactions with clients and, ultimately, creates socially desired outcomes). It is a local government ‘balanced scorecard’ (Moore developed it from the work of Kaplan and Norton).

Measurement of performance is essential to know whether or not purpose is being achieved, value is produced, or goals are achieved. The Public Value Scorecard provides a useful and easy to use way to measure the performance of the whole organisation. It is comprehensive, and has been designed for public services. Rummler and Brache provide a complementary approach to measure operational performance in the cross-organisational processes producing services. Both approaches are easy to use and would eliminate the flurry of activity to measure everything we can and tell people about it.

If local government was a car, we would be driving it and measuring things like tyre air pressure, the thickness of body paint, and wear in wheel bearings without a dashboard showing speed, fuel levels and whether the engine is overheating – information we need so that we know we are not breaking the law and can be confident we will reach our destination.

Moore, Mark H. 2013. Recognising Public Value.

Rummler, Geary A., and Brache, Alan P. 1995. Improving Performance – How to Manage the White Space on the Organisation Chart.

Seddon, John 2014. The Whitehall Effect.