The Performance Management Overview PERFORMANCE MANAGEMENT 1.1 SUPPORT PORTFOLIO

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1 The Performance Management Overview PERFORMANCE MANAGEMENT 1.1 SUPPORT PORTFOLIO

2 This document is part of the of the Performance Management Support Portfolio a series of guides to the key elements of Performance Management, produced by the Local Government Data Unit Wales and the Welsh Local Government Association. Each document can be accompanied by the provision of advice, guidance and training support. For further information, or to use the Portfolio within your organisation, contact: Local Government Data Unit Wales Welsh Local Government Association Published by: Local Government Data Unit Wales Columbus Walk, Cardiff, CF10 4SD Telephone Web Local Government Data Unit Wales, 2005 This material may be reproduced as long as its source is quoted. Any queries should be sent to the Local Government Data Unit Wales at the above address or

3 THE PERFORMANCE MANAGEMENT Overview 1.1 PERFORMANCE MANAGEMENT SUPPORT PORTFOLIO Contents Introduction The Key Competencies 4 Section 1 6 Definitions... 6 What does Performance Management Involve?...6 Section 2 9 Corporate Performance Management Systems...9 Section 3 10 Types of Performance Management Section 4 11 Performance Measurement Section 5 12 Tools in Performance Management and Performance Measurement Needs Analysis Strategic and Service/Business Planning Objective Setting Performance Indicators Target Setting Examples of Good and Bad Targets Data Collection & Data Analysis Self-assessment and Other Tools Personal Appraisal Section 6 19 Roles and Responsibilities Performance Reporting Section 7 21 Terminology: Key Terms Section 8 22 Reference Tools... 22

4 THE PERFORMANCE MANAGEMENT Overview Introduction Performance management and governance is an essential feature of modern organisational management. In an era of increasing public accountability it is imperative that public bodies can communicate vision and strategy and demonstrate progress and outcomes in achieving that vision. Performance management is the discipline of acting upon intelligence and reported information in planning ahead and in managing service operations both directly, and through partnerships with other service delivery agents. The public services in Wales are being reformed under the guidance of the Welsh Assembly Government through Making the Connections. Through local strategic and other partnerships the public sector partners, also working with their voluntary/community sector and business sector partners, are being encouraged to work towards a common vision and common purpose. Supported by joint strategies and shared outcomes and shared targets the public services are increasingly managing and accounting for their performance in partnership. Management of performance should be exercised at all levels of the organisation or partnership, from the member executive to the individual manager and the individual employee. Respective roles and responsibilities, particularly amongst organisations working together in partnership, must be clearly set out and understood. The national framework of public reporting, audit and inspection has grown with the Government drive for higher and more consistent standards of attainment across the public sector. Best Value added impetus to these developments. The Wales Programme for Improvement, which upholds the principles of Best Value whilst streamlining its processes, has the principle of self-improvement through self-awareness at its heart. Wales has developed its particular national performance accountability framework since the transfer from Best Value to the Wales Programme for Improvement (WPI). The national partners are reviewing and revising the performance measurement framework over time to 4

5 1.1 PERFORMANCE MANAGEMENT SUPPORT PORTFOLIO drive performance and account for achievement; the self-assessment and risk management approaches to performance are maturing and becoming more sophisticated in local authorities; Wales is developing local approaches to public services shared performance management and accountability through community strategies and shared outcome measures. This developing Welsh framework is improving the quality and consistency of performance management across Wales, whilst allowing some significant local discretion on local systems and models for fulfilling performance accounting responsibilities. Local government has developed considerable people and systems capacity in performance measurement and performance management and is now more selfregulating and less dependent on external regulation to track, gauge and address performance in its services. The developing Performance Management Support Portfolio will include individual modules to address each of the key areas associated with the development and maintenance of an effective performance management framework. Each module will provide a basic understanding of the competency area, references to further advice and guidance, and identify sources of additional support to enable local authorities to develop their own capacity and capability. Materials may be accessed through the family of support organisations for authorities to use as they wish locally, or with assistance from the appropriate agencies. 5

6 Section 1 Concept & Theory Definitions Performance management is the process by which an organisation achieves the aims and aspirations that define its purpose. Performance management means setting direction and monitoring impact. It is not an exact science, but a set of working styles and attitudes, underpinned by information recording and reporting processes, which drive the organisation to stay on course to achieve its aims. Performance management cannot be effective without clarity of thought on: what needs to be done to meet need and realistic expectation; what we plan to do to meet need; how we will judge success through the use of performance measures; how to deploy resources accordingly; how we are performing in meeting our set measures of success; when and how to act if things are not going to plan; whether our prognosis was right and whether there have been any shifts in need. What does Performance Management Involve? Performance management links the strategy and service objectives of the authority to jobs and people. It is a systematic approach to managing effectively based on: setting corporate, service, team and individual objectives; using relevant performance indicators; appraising the achievement; identifying training and development needs; and then using the knowledge gained to modify objectives and methods if necessary (source : IDeA) Performance management involves a continuous cycle of: assessing need and expectation; setting aims and strategy; translating strategy into policy; translating policy into operational plans; allocating resources to operational plans; overseeing actions; 6

7 1.1 PERFORMANCE MANAGEMENT SUPPORT PORTFOLIO monitoring progress; evaluating effectiveness; risk assessment; risk management; collabortative working with regulators. The Welsh approach to performance management and improvement in local government is based on the principles of (i) local governance and responsibility for performance (ii) self-assessment and self-determination and correction (iii) risk based approach to internal and external intervention with authorities responding to exceptions in performance and achievement, informed by timely and reliable information and intelligence and (iv) proportionate and risk based external regulation and intervention to assure and improve performance. Local authorities have developed corporate and service based risk based approaches to improvement. These risk based approaches extend and adapt more traditional and professionally established approaches to risk management. Local authorities are being encouraged to be more predictive and forward thinking in their risk assessments in order that (i) a narrow view of current and immediate performance risks is avoided and (ii) the principles of sustainable development are observed in longer-term thinking and planning. The role of the external regulators in assuring performance measurement and management systems, and in adding independent assurance and challenge to actual performance, is an essential function within the national framework. Performance management means different things to different people at different levels of an organisation. An effective organisational approach to performance management will enable a team or an individual to be able to be clear about: a. what is expected of them and how they are performing in meeting those expectations and b. how their activities and achievements make a contribution to the achievement of the aims of the wider organisation. This involves expressing objectives in terms where measurement is possible. c. how their activities and achievements make a contribution to the achievement of the wider aims of local partnerships where the authority is not solely responsible for outcomes. This involves expressing objectives both in terms of shared outcome measures where judgements are more qualitative, and in operational objectives where more exact and quantifiable measurement is possible. 7

8 The following diagram displays the performance management cycle that may be used at a strategic, operational or individual level. The language of performance management should be appropriate for the environment. The language is likely to vary between the strategic setting and the operational setting. At all levels, organisations should remind themselves of why they provide services and the critical success factors, which characterise success. "What will success look like and how will we know when we have achieved it? 8

9 1.1 PERFORMANCE MANAGEMENT SUPPORT PORTFOLIO Section 2 Corporate Performance Management Systems Local authorities are encouraged to develop corporate performance management systems. By corporate we mean a centrally co-ordinated approach to the collection and reporting of relevant, reliable, timely and comprehensive information across the range of functions and services. Senior management and members are in an informed position to be able to intervene and make decisions in the best interests of the organisation and the communities it serves. Given the differing characteristics of the vast range of services local authorities provide, from highly prescribed regulatory services to personal care services, a corporate performance management system might be defined as a co-ordinated network of systems which: ensures the translation of corporate aims and objectives into service priorities and objectives; sets standards and targets against agreed performance measures to direct and motivate the workforce to achieve objectives; sets standards and targets against agreed performance measures for internal and external accountability; promotes consistent practice in performance appraisal of the workforce; ensures a consistency of reporting of useful, timely, accurate and complete performance information; sets clear roles and responsibilities for collecting, collating, validating, analysing, reporting and acting upon performance information; maintains sustainable and manageable systems and processes to achieve the above. The network of internal systems and processes deployed across the organisation should be mapped, documented and developed as required to ensure consistency of standards and application. In recent years, technological advancements have led to the development of performance management systems that bring together the elements described above. Ideally, any such system will provide a Corporate Performance Management Tool, which can be applied at a service level and should not replace the need for, but enhance existing operational, service-based systems. 9

10 Section 3 Types of Performance Management There are three broad types of performance management within this approach. Continuous performance management, which involves: regular reporting of performance information to persons in positions of responsibility and accountability; arrangements for those persons to commission reports and investigations to validate information, explore causes, and determine solutions. maintains sustainable and manageable systems and processes to achieve the above. Investigative management which involves: occasional interventions whether planned or triggered by reported performance information and trends; intensive and inquiring review based activity. Project or change management which involves: planning and overseeing initiatives and projects to pilot new methods, introduce change or expand operations; overseeing major programmes (e.g. restructuring, self-assessment or personal development programmes) to achieve organisational change. Effective performance management by managers requires different leadership approaches for different circumstances. As good practice managers are asked to consider three principal styles of leadership which support the types of performance management summarised above. For continuous performance management where performance is sound and progressive, a devolving and highly trusting and encouraging style is recommended; where project to change management is taking place an intensive and involving style at key stages of the project or change programme is recommended; for investigative performance management a more interventionist and directional style is recommended. Managers need to consider the most appropriate and effective styles, and reflect on their skills and abilities in adapting to these styles, in their personal development and performance appraisal. 10

11 1.1 PERFORMANCE MANAGEMENT SUPPORT PORTFOLIO Section 4 Performance Measurements Performance indicators, constructed around the success factors that are critical to the achievement of the organisation s purpose, provide the definition of what we need to measure. Service planning should organise the resources of the organisation to achieve those targets. Performance management is not the same thing as performance measurement. Performance measurement means collecting and analysing data against measures or indicators which taken together paint a picture of the health of the service and the organisation. Performance management is the act of concluding what needs to be done as a result of performance measurement and then taking action. Therefore the organisation should: collect data to provide performance information; analyse and understand information to measure performance; act upon the analysis to manage performance; use of I.T. systems where applicable to further aid each of the above. 11

12 Section 5 Tools in Performance Management and Performance Measurement There are a number of essential tools in the practice of performance management and performance measurement. Local authorities are obliged to use some of these tools, such as statutory strategic plans and statutory performance indicators, through law. Needs Analysis Needs analysis is a useful tool, which profiles the environment in which an organisation is operating. It can provide both factual information on the demography of the community and the nature of the current need for a service, and predictive information on the impact of the changing nature of the community. Needs are not defined purely as those which arise from the community as the consumer of services. There are also requirements to comply with, for example, statutory obligations to ensure certain functions are provided. There are also nationally set minimum standards for some services. An authority has to balance the locally driven needs with the national expectations. Needs analyses are key tools in informing policy and resource allocation decisions. National Policy Regional Intelligence Legislation / Statutory Obligations Community Strategy Local Priorities Demographic Information Index of Multiple Deprivation Strategic and Service / Business Planning Strategic plans, some of which are required by statute or government funding policy regimes, can be useful documents in communicating aims, aspirations and priorities. They can galvanise partnerships with other bodies, co-ordinate effort and resources, and demonstrate to communities how public and other bodies are working together for their benefit. The process of developing a plan is often more important than the outcome of producing a document, as alliances are built in pursuit of a common purpose. 12

13 1.1 PERFORMANCE MANAGEMENT SUPPORT PORTFOLIO COMMUNITY STRATEGY PERFORMANCE POLICY AGREEMENTS STRATEGIC PLANS BUSINESS / SERVICE PLANS Strategic plans provide a high level framework for the development of more practically based operational service and business plans which translate aims into objectives, plans and actions. Service or business plans are operational plans that sustains and develop an arm of the organisation by: defining organisational goals and objectives; defining services and products; assessing need and demand; risk assessment exploring the market environment; forecasting market change; planning the operation both immediate and future; allocating and managing resources; acting as a tool for performance management. Service and business planning can have many benefits including direction through management by objectives, the optimisation of resources, and the motivation of the workforce through a success culture. 13

14 Objective Setting Objectives translate aims into practical and measurable measures of purpose. Objectives need to be purposeful, have clarity of definition, be measurable, and owned by the workforce. Taken together they should provide an overall picture of performance. Performance Indicators Performance indicators are measures for collecting information to demonstrate progress and achievement against objectives. There are numerous performance indicators both statutory and voluntary (often referred to as local) that can show: the performance of a service or function; the performance and health of the organisation as a corporate body. Performance indicators need to have clarity of definition, be measurable, have targets attached, combine fact (quantitative) with views and opinion (qualitative) and measure inputs, outputs and outcomes. Every operational team should have a working set of management indicators through which they can ideally monitor: resources; productivity; responsiveness; quality; customer satisfaction. Using performance measurement to gauge cost effectiveness ECONOMY Outcome based indicators, such as quality of life indicators, can also demonstrate the overall impact of the authority and its partners on the quality of life of the local community. 14

15 1.1 PERFORMANCE MANAGEMENT SUPPORT PORTFOLIO Target Setting Targets represent your planned level of performance and, therefore, need to be based on a sound understanding of current and past performance and the likely influences over future performance. The process of target setting can be complex as predictive work is involved. There are two approaches to target setting. Firstly, the approach of aiming to optimise resources and setting a target accordingly. Secondly, the approach of having a pre-set target (e.g. a national quality standard) and ensuring that resources are allocated to achieve compliance. The first is predictive, whereas the second is compliant. The extent to which the organisation is in control of the process of achieving the target (for example an internal process of input management) and the extent to which the target is subject to external or volatile forces (e.g. discretionary customer take-up of a service) will affect the confidence level in setting a target and predicting outcome. Examples of Good and Bad Targets Examples of good targets: We will reduce the number of missed household collections by 10 percent by next year. We will aim to collect 95 percent of the council tax which is due next year. We will increase the number of visits to local libraries by 20 percent before the end of We will cut the number of unfilled places in primary schools by 10 percent by 31 December Examples of poor targets: We will improve the way we handle complaints. We will buy as many books for the schools as possible. We aim to have the best bus service in the region. We aim to increase co-operation between school and police authorities. We will answer 75 percent of all letters within 5 days (a poor target if the remaining 25 percent take 3 months to answer.) Source: Audit Commission 15

16 Data Collection A reliable and robust system is needed to record and collate data, but the system must be manageable and proportionate to the task. Systems can be information technology based, or paper based, or a combination. As most data collection occurs at source at the front-line, the system and its purpose must be understood and owned. Some issues in data collection are: definition of what to collect; clear and documented systems for collection; the method for collection: continuous or sampling; allocation of responsibilities and roles; disciplines in recording; having repositories for the data; applying validation checks. Data Analysis Data analysis is the act of interpreting the data through models of enquiry and interrogation. Analysis is a critical stage prior to reporting to decision-makers within the organisation. Some issues in data analysis are: having a repository for the data which ensures ease of access and interrogation; being clear about the purpose and propositions of the analysis and using methodologies (valid and robust) to meet the purpose; the importance of establishing actual positions, historical and predictive trends, and comparative positions; separating the roles of data collection, analysis and reporting to maintain integrity within the system. 16

17 1.1 PERFORMANCE MANAGEMENT SUPPORT PORTFOLIO In having confidence in the data at the analysis stage it is important to apply some validity checks. A range of validity checks may be: is the definition of data needs, clear and unambiguous? is the collection system and its methodology suited for the purpose? is the system being applied properly? is the data both complete and reliable having applied the above? Self-assessment and Other Tools Self-assessment tools can be useful in gathering and applying data and opinion on performance whilst simultaneously building participation and commitment amongst the workforce and others. Leading self-assessment tools include EFQM and the Balanced Scorecard. BALANCED SCORECARD FRAMEWORK* Financial Customer Learning & Growth Internal Business * Adapted from Kaplan & Norton The Balanced Scorecard. Harvard Business School Press:9. Original from HBR Jan/Feb 1996, p

18 Other tools which can explore organisational performance and the capacity for improvement are: gap analysis; risk assessment process mapping and analysis; business re-engineering trends analysis; quality models; quantitative and qualitative consultation; metric benchmarking; process benchmarking; feedback systems; appraisal systems. Personal Appraisal A performance management system working at its best will filter through the organisation and provide a sense of direction to the individual employee. Individual performance appraisal, helping to assess and guide progress against personal targets, can motivate and develop. Appraisals can assist the organisation in directing its resources for training and support to the greatest areas of need and impact. Personal development can be knowledge based or skills based. Personal appraisal systems should be dovetailed into performance management systems and human resources strategy. 18

19 1.1 PERFORMANCE MANAGEMENT SUPPORT PORTFOLIO Section 6 Roles and Responsibilities In performance management there are process roles and active roles. Process roles will be played by employees who may be tasked with developing the detail of performance indicators and targets, collecting data, and analysing and reporting data. Active roles involve setting strategy and priorities, agreeing performance measures and targets, acting on reported information and investigating and intervening as necessary. Process roles are likely to be found at the middle management, supervisory and front-line levels whereas active roles are likely to be played at the senior manager and member levels. The executive and scrutiny members share responsibilities for performance management. External parties such as the external auditor also have active roles in performance management. THE NEED TO KNOW PRINCIPLE Community Leader Needs Analysis Strategy Planning Outcomes Analysis Strategic Management Policy Analysis Operational Planning Aggregate Outputs Operational Management Resource Management Process Management Output Management 19

20 Performance Reporting The purposes of reporting information throughout the levels of organisational and member management are: management control of inputs and outputs; management action to deal with variances in performance; strategic resource allocation and management; review of aggregated performance at the strategic level; formal risk management reporting internal accountability; external accountability; internal and external interventions to assert or re-direct. Reporting by exception involves reporting variances in performance and is the most cost and time-effective style of performance management. It works on the basis that the information collection, analysis and reporting system is mature, reliable, properly applied and trusted. If these characteristics are in evidence then: there can be an agreed set of performance indicators; information on performance above or below an acceptable tolerance only is reported; information is made available periodically or more urgently if an unpredicted trend is developing; decision-makers and scrutineers spend time dealing with the variances not the norms. Reported information should combine summary data analysis with commentary on its meaning and its implications. Data is often best depicted visually with the support of narrative. 20

21 1.1 PERFORMANCE MANAGEMENT SUPPORT PORTFOLIO Section 7 Terminology: Key Terms Performance Information: gathering and collating information Performance Measurement: analysing and understanding performance and its trends Performance Management: acting upon the analysis of information Aims: strategic goals which express desired outcomes or states Objectives: concise and measurable goals that give effect to strategy Outcomes: the impacts on communities and their quality of life through the achievement of strategy Inputs: the resources invested Outputs: the products of the investment of the inputs Performance Indicators: measures of performance against objectives Performance Standards: expressions of the expected or minimum/ norm of performance Performance Targets: expressions of the planned level of service 21

22 Section 8 Reading List Reference Change Here! Audit Commission Aiming to Improve: The Principles of Performance Measurement, Audit Commission On Target: The Practice of Performance Indicators, Audit Commission Worth the risk? Improving Risk Management in Local Government, Audit Commission Getting Better All The Time: Making Benchmarking Work, Audit Commission A Measure of Success: Setting and Monitoring Local Performance Targets, Audit Commission Planning to Succeed: Service and Financial Planning in Local Government, Audit Commission All In a Day s Work: Delivering Effective Performance Management, IDeA Performance Management Best Value Discussion Notes, IDeA Choosing the Right Fabric, Cabinet Office Benchmarking and Performance Management, UNISON Securting Better Outcomes: Developing a New Performance Management Framework, ODPM/HM Treasury Wales Programme for Improvement Guidance for Local Authorities 2005 (Circular 28/2005), Welsh Assembly Government Tools From Self Assessment to Service Improvement, Syniad and the Wales Quality Centre What is the Balanced Scoreboard and Deployment of the Balanced Scoreboard Measurement System The Map to Success: Using Process Mapping to Improve Performance, Audit Scotland Getting to Know Your Services: A Step by Step Guide to Developing and Using Information Portfolios to Monitor and Report Performance, Audit Scotland Performance Management and Planning Audit Corporate Level Audit 2000/2001, Audit Scotland 22

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24 Local Government Data Unit Wales 3 7 Columbus Walk, Cardiff, CF10 4SD Telephone Web

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