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The existence of such data makes it possible to reconstruct performance data for prior years, and the resulting time series of data can be used for planning. Past performance is only one way to estimate future performance. Other ways include comparison to other government organizations, standards established through work engineering, private and public sector association data, and research into client needs eg.

Performance targets will have to be realistically set. In planning performance one must take into account what direction the strategic plan gives, what the policy priorities are, how much demand for service there is, how much money is allocated, and other environmental variables. In monitoring and evaluating results, performance measurements are no different from financial data. By themselves, measurements do not tell the whole story about program performance, but variances of actual performance from planned performance, or trends over time, do raise red flags about problems or opportunities.

Such variances do not per se constitute value judgments about whether the program or its managers performed well or poorly. Performance can be monitored not only during the year, but over time as well. A program that spends within its allocation, typically attracts little if any scrutiny. But what if the results the program achieves are declining?

That A results issue is every bit as important as a funding issue. Without performance measurement, results issues might not be detected. Program performance often changes only a little year by year; but a small negative variance compounded over several years can develop into a serious problem. Such situations do occur, and might be avoided if results are monitored as well as resources. Management often consists of trade offs among competing priorities, and results management is no different.

In managing results, managers are faced with situations such as: Performance measurement will not make these decisions for us but it will make the trade offs clearer. Performance measurement will become stronger as it is used more often it is used and for more different purposes. Some applications of performance measurement are externally initiated, and some are management processes internal to the program or department.

A major advantage of the framework presented in this article is that the information can be used in a variety of management processes.

Measure What Really Matters: The Secret To Effective KPIs

This notion is illustrated by Exhibit 3 below. These are the results most critical to program success, and of interest to managers, politicians and the public alike. Features of the external and internal applications are discussed below, beginning with the internal management processes.

Strategic planning is the process which determines the basic mission of an organization, its long term goals, the contribution of each part of the organization and the action that must be taken. The three step process for developing performance measurement contains the main elements of strategic planning, in particular defining the mission and identifying the strategic outcomes. Strategic planning in government, however, often lacks performance measures and, hence, offers weak and general guidance to operating programs.

Performance measurement will assist strategic planning by: Operational Planning and Control.

Operational planning and control is probably the most frequent and important use of performance measurement. The shorter term operational planning and control horizon eg. Therefore the relevant results are those which managers and staff can influence over the shorter term: It is worth stressing again the importance of results from the clients' point of view. It is possible to have a very busy year without making any difference to clients.


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If a government organization has any kind of performance measurements, they are usually about work process outputs. Indicators about client benefits or impact are too rare. But consider the following situation where the operational targets are being achieved or exceeded but client benefits are not.

This program is meeting its work plan targets, but it is not effective in delivering value to the clients.

Focus on key areas to reach your goals

Perhaps the "wrong" work processes are being emphasized. Without client oriented performance measures this program might have no indication that it should change. The main uses of results information in operational planning and control are: Program evaluation is a more formal and rigorous assessment of a program than is operational planning and control, and it takes place at much longer intervals.

Program evaluation is broader in scope than operational planning and control, questioning the usefulness of and need for programs. Thus strategic outcome and client benefit information is more relevant that work process outputs. Performance measures for use by managers in program planning and control are no substitute for program evaluation. But the method described in this article for developing performance measures will supply much of the data needed for a typical program evaluation. There is a difference between holding a program accountable and holding a manager accountable. The distinction is that while the program must ultimately be seen in light of its strategic outcomes, these results are influenced by more than one government program and therefore are by definition beyond the manager's personal control.

But strategic outcomes are subject to too many outside influences. So for the purposes of a program manager's performance appraisal, strategic outcomes are not relevant. Performance contracting is receiving renewed attention today as a means of strengthening accountability and increasing managers' motivation to improve program performance. Performance contracting is impossible without performance measures. Accountability to Political Governing Bodies. Many governments adopt performance measurement precisely because the political governing body has demanded it as a means to strengthen accountability.

The problems facing government today, and the programs we use to address them, are many and complex. Politicians cannot possibly have personal and detailed knowledge about all of them, yet they are required to make decisions about them. It seems eminently reasonable that a political decision maker should be able to ask from any program, and receive immediately: Politicians are elected to make policy decisions. So in providing performance information to them, it is not enough simply to report work process output and efficiency data.

Politicians are rightly and legitimately interested in the benefits programs provide to clients and in the greater good those programs are doing for the community or society. Although performance measurement will help to bring more rationality and analysis to the resource allocation process, resource allocation will never be a wholly rational, analytical process. In government there is no common denominator for comparing alternative investments. Also, in most governments, the size of the discretionary budget is quite small; ninety percent of the budget or more is allocated before the budget making process even begins because of legal obligations eg.

Measuring for success

In government resource allocation is a competition for limited funds among non-comparable demands. Funds are allocated by means of pressure that advocacy groups bring to bear on the politicians. A government department has an advocacy role to play because it has a mandate to affect a certain segment of society's activities.

How to Develop Key Performance Indicators

Thus, a department can apply pressure. Pressure can take many forms, and not all forms are legitimately available to the department. But the source of pressure or influence that the department can deploy is information, because the government department probably has more information about a given issue than any other group.

It is unfortunate most funding requests from government departments are made in operational terms "More money is needed to do more work" , as this argument rarely impresses politicians today. There is much work that can be done and little money with which to do it. In making a funding request or disputing a budget cut, the program must provide information that makes sense to politicians.

The money will be spent on work process outputs, to be sure. But the funding request must be justified in terms of the delivery of benefits to the client and the outcomes the program will produce for the community or society.

This is way to ensure politicians listen to and understand a funding request. Many factors contribute to a political resource allocation decision, and results information is just one of those factors.

They should be quantifiable able to be measured and aligned to the CSFs and business goals to be effective and achievable. They limit the amount of data or areas of focus to the ones that are truly important to business success. Spending time to do this exercise will help you identify the most important CSFs for your business. Financial — what is the financial viability of the business, and will our strategy deliver financial benefits?

Internal business processes — what needs to be improved within the business to deliver to our customers and other stakeholders? So it's important that you choose KPIs: Financial Your financial measures should tell you: What is the financial viability of the business? Will our strategy deliver financial benefits? Customer Your customer measures should tell you: How do our customers see us? Internal business process Your internal business process measures should tell you: What needs to be improved within the business to deliver to our customers?

What needs to be improved within the business to deliver to other stakeholders? Learning and innovation Your learning and innovation measures should tell you: What needs to be done to continue to improve and innovate to create value for your customers?


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What needs to be done to continue to improve and innovate to create value for your stakeholders? Business growth Improving innovation.