A scorecard for the public sector

The Integrated Development Plan (IDP) and Performance Management System (PMS) - requirements of the Local Government: Municipal Systems Act of 2000, Public Service Act of 1994, Public Service Regulations of 2001, and Municipal Systems Act - are critical drivers of transformation in government.

Six years on, basic measuring and monitoring is taking place and these efforts are bearing some fruit. However, as this initiative advances, its complexity increases. To realise the true benefits of performance management, processes and underlying systems now need to be taken to the next level.

The Municipal Systems Act requires that municipalities set targets and monitor and review their performance in order to achieve their integrated development plans (IDPs).

The quest: enhanced efficiency and effectiveness, increased productivity, accountability for the use of resources, the achievement of results and improvement of the primary objective of government: citizen service and convenience. The PMS is the tool used to achieve this.

The specifications written for these two functional elements (IDP and PMS) have obligated departments and municipalities to develop scorecards and guidelines, define processes and identify key performance indicators (KPIs) to enable measurement and management of the achievement of strategic and operational goals. While this creates the foundation for performance management, departments are using manual systems supported by Excel spreadsheets and dashboards to enable it - an impractical and unsustainable approach.

To make performance management and scorecarding feasible, automation is required.

Scorecarding provides the means to capture and clearly articulate the organisation's strategy, align all stakeholders and employees toward those goals, and help measure and manage the organisation's progress towards those objectives.

Government is keenly aware of the metrics it needs to obtain from source systems to enable the development of scorecards and dashboards. The complexity of this task lies in gathering the right (clean) information and linking source and operational systems - and people - into a matrix that details and measures progress and performance at all levels within a defined framework of determined strategic objectives using specific business rules.

Bearing this definition in mind, take the management of the financials of a municipality as an example. A province is divided into a number of municipalities and each municipal council is tasked with carrying out the executive and legislative functions of local government. The municipality itself is divided into a number of wards (3 895 wards in South Africa) and in each ward, roads, parks, water, sewage and sanitation, and other basic services, must be managed.

As many of these functions are executed by third-party contractors, stringent processes must be put in place to measure and manage the performance of the contractors and the responsible government officials. Key performance areas that need to be measured for the purposes of financial management and governance may include budget spend, capital expenditure, the assignment of projects to contractors, the elimination of spikes in spend, etc. Clearly, using a manual system to manage performance on all these fronts can become a large administrative headache doomed to failure.

The private sector has always had a strong focus on performance improvement. This focus brought about such management trends as total quality management (TQM), re-engineering, Six Sigma, and Kaplan and Norton's Balanced Scorecard. The success of the latter has driven the creation of legislation to ensure its adoption in the public sector.

The application of a balanced scorecard for the public sector differs from that applied in the private sector due to a difference in priorities, objectives, organisational structure, culture and priorities.

A notable difference relates to the ordering of the four typical balanced scorecard perspectives: learning and growth, internal, external (customer) and financial. In the public sector, focus is on meeting the needs of the customer within the available funding and the customer (or citizen) perspective is thus prioritised. In the private sector, the focus is on the financial perspective, such metrics as shareholder value, revenue, and profitability.

Another key difference is the increasing investment in the private sector in business intelligence and performance management software solutions. Simply put, few large organisations can compete effectively in a highly competitive and dynamically changing business environment without these solutions.

In fact, a preview of the results from Gartner's annual survey of 1 400 CIOs worldwide shows that BI is the number one technology priority in 2007 - for the second year running.

According to Andreas Bitterer, research vice-president at Gartner, BI has become a strategic initiative and is now recognised by CIOs and business leaders as instrumental in driving business effectiveness and innovation.

There are some key similarities between implementing performance management in the public and private sector, however. Managing performance effectively, whether in a working group or across an organisation, requires everyone to work together toward the same set of goals. They must collaborate and share a consistent view of what constitutes organisational success. There are three elements to this:

* Consistency in data: Everyone must be working from the same page, with the same information, and accept that information as fact.
* Consistency in focus: Everyone must agree on the high-level strategy and the desired result. The outcomes must reflect the organisation's goals. Measurement must drive results. To achieve these goals, everyone must agree.
* Consistency in accountability: Everyone is accountable for his or her area of responsibility. People understand their success maps directly to the success of the organisation.

Quite literally, nothing can be managed if you can't measure it. The biggest challenge for any organisation implementing performance management - public or private - is to link knowledge and data. Knowledge is the sum total of the recall, experience, belief and instinct of a person or work group. Profiling this knowledge will allow the organisation to identify the sources of data most likely to deliver the information needed to form a realistic view of a situation and enable decision-making.

It will also enable the organisation to understand what effect or impact the achievement of certain thresholds (eg, over or under-expenditure, or lagging projects) will have on other areas of business, so enabling business rules to be written.

There can be no big bang approach to performance management. However, once the strategic goals of a unit or department have been defined and KPIs implemented, reports and metrics regarding those KPIs can be available within four months. Integrating systems and creating a responsibility matrix can take a year or more, however, depending on the size of the organisation and the depth of integration required.

In creating a performance management matrix, the first step would be to define key business requirements and satisfy the primary service demand, tying these back to the KPIs - eg, (reduce) costs, (increase) productivity, (enhance) citizen convenience.

Each functional unit will have its own set of KPIs, and each KPI will have, say, 10 items that make up the achievement or measurement of that KPI. These items may be a function or individual task. KPIs can also be introduced for each individual within the organisation, empowering them by clearly defining their role and responsibilities, as well as the impact of their actions on the achievement of group and organisational goals.

Introducing transparency into an organisation requires a mindset change, however. A scorecard determines individual accountability and activities and processes are mapped.

Thus, wherever an activity changes the KPI metric, analysis will show the root cause of a problem - ie, where the process got stuck or which variables changed. This changes the significance of completing tasks but also empowers individuals by exposing hidden problems and opportunities. When thresholds are reached, reminders are sent out by the system to accountable individuals, who then have a certain amount of time to respond by either actioning a task, delegating it, rejecting it, resolving it or escalating the problem to a senior. This ensures a major problem is not discovered only four months later when it has become a crisis.

BI and performance management software enables organisations to take performance management to the next level, moving from access to knowledge to actionable insight.

This is determined by looking at the event, the activities around it and the behaviours that led up to it, so defining the actions that lead to a positive business outcome. That outcome too can be predefined. For example, the 'same' outcome may not be required. Managers may want to reduce costs, save time, optimise resources or increase citizen convenience. Understanding the variables and their impact, as well as the process and performance criteria of key employees enables what-if scenarios to be created, decisions to be made and plans to be drawn up.

With Excel spreadsheets, a strategic goal change would take six months to implement, as it would require many fine manual adjustments - from strategic to operational processes and the functions of personnel - in an unintegrated system. With a BI/PM software suite, the scorecard matrix is defined and the same changes can be communicated and implemented in a matter of weeks.