Week 13: Performance Management and Performance Budgeting

• Discuss BCP Assignment and Presentation Order

• Conceptual Origins of Performance Management

• Government Performance and Results Act (GPRA)

• Strategic Planning

• Performance Measurement

• Performance Budgeting

• Examples in setting goals, objectives, measures

Why Performance Management?

Context• Public dissatisfaction with government• “Reinventing Government” 1992• Intractable problems (crime, health care, education)• Fiscal crisesGoals• Better management• More effective and efficient government programs• Better accountability• More Congressional oversight -- especially of cross cutting

programs

Key Tenets of Performance Management

• Mission-driven organizations/culture change

• Outcomes orientation (as opposed to inputs)

• Customer and service focus

• Use of performance information (program and personnel)

• Incentives and rewards

• Deregulation/flexibility for program managers

• Decentralization/empowering employees

• Accountability

• Strategic Plan linked to budget (performance budgeting)

Outcomes Orientation: Challenges

• Outcomes are hard to measure

• Outcomes are usually not controllable by any one agency

• Outcomes are often long-term

• Consequences of negative outcomes (for managers and politicians)

Inputs

Process

Outputs

Outcomes

Government Performance and Results Act (1993)

• Components– strategic plans, performance plans, performance reports

– pilots: performance budgeting; managerial flexibility

• Status report (GAO)– some improved use of measures and data

– strategies discussed in terms of performance goals

– limited organizational capacity to collect and use data

– results orientation limited; esp. cross-cutting programs

– need to show performance consequences of budget

• Future Prospects– Pre-Bush: lowered expectations; limited Congr. interest

– Bush era: re-orienting from a Clinton program

Strategic Planning

• A key part of performance management• Definition: “a disciplined effort to produce fundamental

decisions and actions that shape and guide what an organization is, what it does, and why it does it”

• Process for determining direction, purpose, priorities– takes into account strengths and environment

• Benefits– develops a framework for decision making– focuses organization on key issues– look across organizational boundaries– helps take charge of change

Strategic Planning Process

• Common, useful steps– convene stakeholders– develop mission statement– look at internal and external environment– identify key issues– create vision

• Keys to success– fit with organizational culture– champions for the process at high levels– evidence that the plan matters--that it’s used

Integrated Planning at CSU, Sacramento

PlanningPlanningPlanningPlanning AssessmentAssessmentAssessmentAssessment

Resource AllocationResource AllocationResource AllocationResource Allocation

Evolution of CSUS Strategic Plan and Planning Process

• From unit plans to Strategic Plan (eight themes)• Linking plan and budget – “resource priorities”• Impact on budget process – requests must address resource

priorities• Adding assessment (evaluation)

– search for measures and standards• Improve objectives

– more specific– more measurable

• Tighten and explain the budget links (more next week)• Strategic Plan is dynamic

Performance Measurement Defined

American Society for Public Administration:

“ A method of measuring the progress of a public program or activity in achieving the results or outcomes that clients, customers., or stakeholders expect.”

Performance Measurement

Purposes and audiences:• For policy makers to determine program success and relative

priorities• Public accountability

– symbolic value– actual information

• Information for managers to increase effectiveness of organizations

*******************************Discussion questions: 1. What if objective measures of performance diverge from perceived

measures (citizen satisfaction levels)?2. Does better performance result in higher level of citizen

satisfaction?

Performance Measurement Vocabulary

• Clarify the differences among:– objectives– performance measures (or indicators)– value for a performance measure– benchmark or standard

• Objective: the intended result of a program or service• Performance measure: a basis for reporting outcomes• Value on performance measure: the score or outcome • Benchmark: a standard to which to compare the score **********************************• Policy outcome v program outcome--useful to distinguish

what outcomes are within agency’s control

Performance Budgeting

• Definition: Systematic incorporation of performance information into the budgetary process

• Basic Requirements

– availability of performance information

– use of that information in budgetary decision making

– program structure (or at least program thinking)

• “Program” -- a set of related functions that contribute to a common goal

• Programs should not be defined around

– organizational structure

– funding source

Relating Performance Measures to Budgeting

• Purpose of the budget process

– To help decision makers make informed choices about the provision of goods and services and to promote stakeholder participation in the process

• Ideal performance budget: helps decision makers understand performance consequences of budget decisions

• Good performance budget: helps decision makers connect $$ to program results to try to affect outcomes

Performance Budgeting in Theory

• improvement over line-item budgeting

• focus on performance, not compliance

• connects resource needs to results (tight links)

• integrates performance information into budget structures and budget process

• provides for informed choices: impact of $$ support levels

• improves accountability

• improves management

Steps in Performance Budgeting

• Establish a program plan (mission/goals/objectives)

• Select means to measure results (measures/indicators)

• Set performance targets (or standards)

• Determine strategies for meeting targets

• Provide cost projections for meeting strategies

• Allocate funds based on cost projections

• Collect data on performance measures (the measurements)

• Adjust funding???

Performance Budgeting in Practice

• hard to define and measure outcomes

• hard to tie dollars to outcomes

• many factors outside control of agency and long term

• limited knowledge of cause/effect relationships

• budget structures don’t match program structures

• loose linkages with budget at best

• greatest benefit is internal to organization

• possible perverse incentives – what’s measured gets done

History of Performance Budgeting

• 1949 Hoover Commission• Planning-Programming-Budgeting-System (PPBS) LBJ:

1965 • Management by Objective Nixon: 1973• Zero-Base Budgeting (ZBB) Carter: 1977• GPRA Clinton: 1993 ***********************************• States’ primary use of perf. budg. is at agency level, not in

central budget office or legislative budget process• Cities:

– less than half of cities >25,000 use performance measures

– less than ¼ have centralized perf monitoring systems

Questions to Consider in Developing Performance Budget

• Are the program purposes and outcomes clear?

• Can you determine the service effort and accomplishments?

• Are major funding issues highlighted and supported with performance data?

• Does the narrative and performance information “tell the main budget story” in a manner that is easy to understand?

Performance Budgeting Issues

• Rationality revisited– is performance budgeting just another attempt to rid

budgeting of politics? • What should be the consequences of agencies not meeting

their performance goals?• Rewards v incentives?• Rewards to unit budget or individuals (salaries)?• Will managers focus too much on technical measurement

and lose sight of meaningful results?• Are outcomes really what we should be measuring?

– does it depend on goal/audience?

State-level Initiatives in Performance Management

• Most states have performance budgeting requirement (some legal, some executive order)

• great variation in degree of actual linkage to budget• more valuable as management tool• California:

– executive order for strategic planning– Performance and Results Act of 1993– set up performance budgeting pilots– not a priority for Davis administration; pilots not being

continued– Grade: C from “Governing”

Preview of Week 14

• Workbook on performance measures

• Last memo due (not counting portfolio reflection)

– performance measures

• Class exercises on developing performance measures