IMPACT OF EFFECTIVE PERFORMANCE MANAGEMENT

By: Daniel J de Lange- Director Finance AND Corporate Services and CFO

Email: ddelange@sbdm.co.za082 557 2064

Disclaimer(reputational risk)

Anything that I say during this presentation is my opinion and not necessarily the opinion of IMFO or my Employer

Some of the situations that I mention may or may not be true and the identities of any parties involved have been disguised.

WHY?• Why are so many municipalities receiving

qualified ,disclaimer ,and adverse audit opinions?• Why are so many municipalities experiencing cash flow problems

and are unable to meet their financial commitments?• Why are so many municipalities underspending on their MIG

grants?• Why is the staff turnover at senior management level so high and

why is it taking so long to finalise disciplinary cases ?• Why does the irregular expenditure reported at local government

level run into billions of rands?

What are the root causes of these issues?

AG Audit Focus Areas(risk management focus areas)

• LEADERSHIP• FINANCIAL AND PERFORMANCE

MANAGEMENT• GOVERNANCE

LEADERSHIP framework•

•

• Provide effective leadership based on a culture of honesty, ethical business practices and good governance, protecting and enhancing the best interests of the entity

• Exercise oversight responsibility regarding financial and performance reporting and compliance and related internal controls

• Implement effective HR management to ensure that adequate and sufficiently skilled resources are in place and that performance is monitored

• Establish and communicate policies and procedures to enable and support understanding and execution of internal control objectives, processes, and responsibilities

• Develop and monitor the implementation of action plans to address internal control deficiencies

• Establish an IT governance that supports and enables the business, delivers value and improves performance

FINANCIAL AND PERFORMANCE MANAGEMENT

• Implement proper record keeping in a timely manner to ensure that

complete, relevant and accurate information is accessible and available to support financial and performance reporting

• • Implement controls over daily and monthly processing and reconciling of

transactions• • Prepare regular, accurate and complete financial and performance reports

that are supported and evidenced by reliable information• • Review and monitor compliance with applicable laws and regulations• • Design and implement formal controls over IT systems to ensure the

reliability of the systems and the availability, accuracy and protection of information

GOVERNANCE

• Implement appropriate risk management activities to ensure that regular risk assessments, including consideration of IT risks and fraud prevention, are conducted and that a risk strategy to address the risks is developed and monitored

• Ensure that there is an adequately resourced and functioning internal audit unit that identifies internal control deficiencies and recommends corrective action effectively

• Ensure that the audit committee promotes accountability and service delivery through evaluating and monitoring responses to risks and providing oversight over the effectiveness of the internal control environment including financial and performance reporting and compliance with laws and regulations

•

• “IF YOU HAVE NOT ESTABLISHED A PERFORMANCE MANAGEMENT UNIT IN THE MM’S OFFICE AND AN EFFECTIVE PERFORMANCE MANAGEMENT SYSTEM THERE CAN BE NO EFFECTIVE MONITORING AND EVALUATION OF PERFORMANCE ,RESULTING IN POOR SERVICE DELIVERY STANDARDS AND POOR FINANCIAL MANAGEMENT“

• Performance Management is an ongoing, continuous process of communicating and clarifying job responsibilities, priorities and performance expectations in order to ensure mutual understanding between employer and employee.

• It is a philosophy which values and encourages employee development through a style of management which provides feedback and fosters teamwork.

• It emphasizes communication and focuses on adding value to the organization by promoting improved job performance and encouraging skill development.

• Performance management involves clarifying the job duties, defining performance standards, and documenting, evaluating and discussing performance with each employee

INTRODUCING PERFORMANCE MANAGEMENT

The function of performance management and its use by officials is regulated by the following legislation:• The white paper on local Government (1998).• The Municipal Systems Act (32/2000).• The Municipal planning and performance Regulations (2001).• The Municipal Finance Act (56/2003).• The Municipal Performance Regulations for Municipal Managers and

Managers Directly Accountable to Municipal Managers (2006).• Appointment and conditions of employment of senior managers(2014)

Legislative and Regulatory Framework

Beyond the fulfilling legislative requirements, the following objectives provide benefits for all stakeholders to the process:-• Increased certainty of job roles.• Increased communication across the institution.• Facilitation of decision making through the clarification of goals and

priorities.• Provision of early warning signals highlighting under-performance so

that timely intervention can steer performance back on track.• Continuous assessment of the performance of the municipality so as to

highlight areas requiring improvement.• Creation of a culture of the municipality amongst all officials including

recognizing excellent performance and correcting poor performance.• Assist in building a teamwork approach

What are the Objectives of the Performance Management System?

Five Dysfunctions of a Team(Management Team or any other team)

• Absence of trust• Fear of conflict• Lack of commitment• Avoidance of accountability• Inattention to results(need for achievement and measuring results)• There is a need to hire people capable of being strong team players,

that fit into the corporate culture and are committed to achieving the municipality’s development goals

• A functional cohesive team is an advantages and an asset for any organization

To ensure that a fair PMS is implemented, the following principles must be maintained at all times:-

Principles Governing the Performance Management System

SIMPLICITY The system must be simple, user friendly and easy to operate .

POLITICALLY DRIVEN As the IDP is a political document, so must the PMS be politically driven.

TRANSPARENCY AND ACCOUNTABILITY The process must remain open and transparent

INTERGRATION The system is intertwined with all areas of the institution and must therefore be integrated into other processes in the municipality

OBJECTIVITY Performance management must be founded on objectivity and credibility.

Levels of Performance Management

INDIVIDUAL LEVEL

OPERATIONAL LEVEL

STRATEGIC LEVEL

PERFORMANCE AGREEMENT

SDBIP / DEPARTMENTAL

SCORECARD

IDP

EMPLOYEE PERFORMANCE

DEPARTMENTAL PERFORMANCE

ORGANISATIONAL PERFORMANCE

Levels of Performance Management

INDIVIDUAL LEVEL

OPERATIONAL LEVEL

STRATEGIC LEVEL

PERFORMANCE AGREEMENT

SDBIP / DEPARTMENTAL

SCORECARD

IDP

EMPLOYEE PERFORMANCE

DEPARTMENTAL PERFORMANCE

ORGANISATIONAL PERFORMANCE

Organisational – Individual Performance Link

EMPLOYEE PERFORMANCE

ORGANISATIONAL PERFORMANCE

PLANNING, IMPLEMENTATION, MONITORING, REVIEWING, REPORTING

Two Essential Parts

• Performance Indicator – what it is we are measuring

• Performance Target – what performance we are trying to achieve

Characteristics of Performance Indicators*

• Measurable• Relevant• Objective• Precise

* Reg 9 (1) (b)• practical and realistic• measure efficiency, effectiveness, quality and impact• commensurate with available resources• commensurate with capacity• consistent with IDP priorities and objectives

* Reg 12 (1)

Mandatory Performance Indicators*

• % of households with access to basic services• % of households earning less than R1100 with access to basic

services• % of capital budget • No of jobs created through economic development initiatives• No of people from employment equity target groups in three

highest levels of management• % of budget spent on workplace skill plan• 3 financial ratios dealing with debt

* Reg 10

Challenges

• Low quality IDPs (compliance rather than municipality’s strategy) • Some municipalities not developing quality SDBIP • Misalignment between IDP priorities and PAs• Municipalities not conducting quarterly reviews• PERFORMANCE MANAGEMENT NOT ROLLED OUT TO LOWER LEVELS• In some provinces section 57 managers continue to receive performance

bonus without performance assessments or annual performance reports being submitted

• PM not appreciated as a tool to enable municipalities to deliver on developmental mandate

Challenges(Cont)

• Planned targets not achieved;• Key Performance Indicators(KPI’s) not consistent with the approved annual

performance report;• Changes made to the SDBIP without being approved by Council;• KPI’s and targets not “SMART”; simple ,measurable , accurate and realistic

targets• Reliability of reported performance information not sufficient;• Indicators does not relate logically to strategic goals;• No processes and systems in place to produce the KPI;• No evidence available to substantiate performance;

Challenges(Cont)

• Management does not monitor the data assurance procedures in place such as data collection, processing and monitoring procedures.

• Compliance with legislation eg submission and signing of performance management docs by due dates.

• No trained/specialised performance management person in position. It is usually “IDP/PMS Manager” and hence PMS is neglected and focus only on IDP. This has become a critical position now that AG will start focussing on performance. The right calibre of person with good management skills and strong leadership that could report regularly and objectively on performance and that can introduce a PMS system.

Challenges (cont)

• Political and Administrative leadership and oversight is key. MM and Mayor/Mayoral Committee

• Evidence files are not complete at municipalities –verifying info, keeping files central per dept etc. AG…

• Electronic tools are not used effectively as data is not populated on time - some municipalities think an electronic tool is a performance management system.

• PMS Managers are not sent for training in KPI Development, M&E etc so that they could transfer the knowledge gained.

Challenges (cont)

• The placement of the PMU in the organisation is important. It should be placed in the MM’s office as the authority for performance must come from MM and also legislation state that the Mayor is responsible for ensuring a PMS System is in place and delegated to MM.

• The establishment of PMS Forums is very valuable for a District as in our case where knowledge are shared etc.

• Performance Regulation 2006 for MM and Directors Guidelines for implementation

• Planning for performance is a major challenge, hence our KPI and targets, budgets are skewed

Obligations to ensure collective performance

Organisation• Enabling environment to facilitate effective

performance• Clarify development objectives and

performance expectations • Regularly review employee and provide

feedback on performance• Access to skills development and capacity

building (PDP)• Work collaboratively with employee to solve

problems that may impact on performance• Delegate powers required by employee to

enable to meet performance objectives• Make available necessary resources required

to enable employee to perform

Individual

• Buys into and participates in the PM system

• Understanding of strategic intent (IDP)

• Work collaboratively with employer to solve problems that may impact on performance

• Commits to fulfilling their part in enabling the institution to deliver on mandate

• Fulfills commitment i.t.o performance agreement

Creative Problem Solving Solutions• DEALING WITH THE ROOT CAUSE OF THE PROBLEM AND NOT THE

SYMPTOMS OF THE PROBLEM

• Root cause analysis (RCA) is defined as the identification of why an issue occurred vs. only identifying or reporting the issue itself.

• In this context, an issue is defined as a problem, error, instance of noncompliance, or missed opportunity.

• Root cause analysis benefits the organization by identifying the underlying cause(s) of an issue. This approach provides a long-term perspective for the improvement of business processes. Without the performance of an effective root cause analysis and the appropriate remediation activities, an issue may have a higher probability to reoccur. Root cause analysis helps prevent additional rework and proactively addresses future recurrences of the issues.

General Process for Performing a RCA

1. Define the problem.2. Gather data/evidence.3. Ask why and identify the true root cause associated with the

defined problem.4. Identify corrective action(s) that will prevent recurrence of the

problem.5. Implement the corrective action(s).6. Observe the corrective actions to ensure7. If necessary, re-examine the RCA.

Concluding Remarks• Good performing individuals =Good performing institutions• A Performance review is an opportunity to identify root causes of

poor performance and to take appropriate action to improve performance

• Need to appreciate the value of PM in fulfilling our legal mandate• Critical relationship between organizational performance and

individual performance• PM policy framework need to also outline process and procedures

for managing individual performance• Do not be afraid to introduce to introduce new creative approaches

to improve decision making and problem solving

• Deal with the root causes of the problems not the symptoms

• “Lets sharpen the saw” Steven Covey

Thank you for your attention