Management Information Framework 

Central Guidance:  Performance Indicators and Measures

Getting Involved in Improving Performance

Discussion Draft  

The following is a discussion draft entitled 'Central Guidance: Performance Indicators and Measures' which has been produced as part of the roll-out of the Management Information Framework (MIF). It is being issued initially as a discussion draft on which comments are invited, with a view to finalising the guide by the end of Autumn 2001. 

The guide draws mainly on experience in other countries. It provides assistance in choosing indicators, warns about the pitfalls and outlines the characteristics of good indicators. It describes what managers can do to select the right financial and non-financial performance indicators. 

The document represents work in progress. It could benefit from comments of potential users and especially from the inclusion of examples in the Irish context of good practice in the development and use of performance indicators. The intention is that these comments and examples will be incorporated in the final guide.

Comments can be sent to:

Denise Tully,

Management Information Framework,

Department of Finance,

15 Lr. Hatch Street,

Dublin 2.

The deadline for comment is Friday 26 October, 2001.

The Development and Implementation of Improved Performance Information in Departments  

"The fundamental reasons for introducing systems of accrual accounting are to underpin and strengthen performance management and focus on results."

"In addition to the standard functions of a financial system, it will facilitate the use of financial and non-financial performance indicators.  In this way, the model will support the results driven SMI process"

- Financial Management in a Reformed Public Service (July 1999) Report of the Strategic Management Initiative Working Group on Financial Management

A report from the Technical Issues Subgroup of the Management Information Framework

Preface

This is a discussion draft of a “Central Guidance” document which is to issue in the Autumn through the Consultative Committee for the Management Information Framework.  It has been prepared by a group working under the general direction of the Technical Issues subgroup of the Committee.  The document is about the selection and use of performance indicators in the public service. It has a particular focus on the information requirements stemming from the various changes taking place under the Strategic Management Initiative but it endeavours also to take account of the needs of all users of performance indicators.

The document represents work in progress. It could benefit from comments of potential users and, especially, from the incorporation of examples in the Irish context of good practice in the development and use of performance indicators. It is being circulated to all Departments.  Comments on the draft would be most welcome as would information on examples of good practice which could be incorporated in the final version of the text which should prove useful to all in the public service who are involved with the production and interpretation of performance indicators.

Julie O’Neill

Assistant Secretary

Chairperson of Technical Issues subgroup

Good Practice in Developing and Implementing Performance Indicators

Discussion Draft

A Report from the Technical Issues Subgroup of the Management Information Framework  

For further information or to pass any comments please contact:

Stephen O’Sullivan                       or                 Kevin Dixon

Department of Finance,                                    Department of Finance,

15 Lr. Hatch St., Dublin 2.                                15 Lr. Hatch St., Dublin 2.

E-mail: Stephen_O'Sullivan@finance.irlgov.ie       E-mail: Kevin_Dixon@finance.irlgov.ie

Tel: 01 639 6248                                             Tel: 01 639 6265

Contents                                                                                                                Preface                                                                                                       

1.       Purpose of this guide and who should use it                                               

2.       The Management Information Framework                                         

          2.1   Background                                                                                    2.2  Putting Performance Information into Context

 2.3       Departmental Strategy Statements       

2.4       Business Plans                                                                               

2.5       Customer Service and Delivery                                             

2.6  Other Applications for Performance Indicators                   

          2.7  Performance Management and Development System                    

          2.8  Programme for Prosperity and Fairness                                            

          2.9  National Development Plan/Community Support Framework           

3.       Getting it right for you: getting involved in selecting, developing

          implementing and using better performance information                      

          3.1  What to do before selecting indicators                                      

          3.2  Linking individual and organisational performance indicators           

          3.3  What is the department seeking to achieve?                              

                  3.3.1  Time Horizon                                                                      

                  3.3.2  Inputs, Outputs and Outcomes  

                 3.3.3  What is important to measure and to whom? 

                 3.3.4  What is cost effective to measure?                        

                 3.3.5  Some steps to take to reduce the risk of error          

         3.4  Selecting, implementing and using performance indicators and 

                targets                                                                                  

         3.5  The Role of the Business Manager in selecting organisational  

               indicators and measures                                                              

          3.6  Managing the Information needs of Stakeholders                      

          3.7  Balance Competing Demands: Helpful Techniques                    

                3.7.1  Framework for the Strategic Management Process              

                3.7.2  Balanced Score Card                                                             

                 3.7.3  Costing, Outputs and Performance Measures                   

       3.7.4  Activity Based Costing                                                 

       3.7.5  Benchmarking                                                                 

References                                                                                                    

Appendix 1:  Some Key Definitions                                                            

Appendix 2:  Glossary                                                                                      

Appendix 3:  Framework for the Strategic Management Process                   

1.       The Purpose of this Guide and who should use it  

Departments and Offices have embarked on a cycle of producing strategy statements and business plans under the Strategic Management Initiative.  This will see the production of reports on results obtained and the extent to which goals have been met.  These reports will require the definition and development of performance indicators. 

This Guide is primarily aimed at managers who are or who will be selecting, developing and using performance indicators for Management Information Framework purposes.  It should also be of value to anyone who needs to produce regular reports on performance in such areas as Quality Customer Service, the National Development Plan and the Programme for Prosperity and Fairness.  All who need to complete a role profile form for the Performance Management Development System may also find it useful. 

The Guide has been produced as part of the roll-out of the Management Information Framework (MIF) under which Departments are producing enhanced management information systems.  These systems will contain, among other things, the information which will be used to generate reports for senior management about progress under the business plans and departmental objectives. 

The full development of the system will be a lengthy process.  It will require the specification for each Department of the high-level results which Government policies are intended to have in society and the definition by Departments of what they actually produce or deliver with a view to making those impacts on society.  It will require the detailed costing by Departments of each and every departmental output.  The point of structuring departmental information systems in this way is to allow reports to be produced which will facilitate accountability arrangements and strengthen the basis for resource allocation decisions.

Although it will be some time before a fully-fledged performance reporting system is in place, there is already a need to develop performance indicators across a broad range of activities.  Whether the concern is with departmental objectives or with individuals’ performance, there are certain steps which should be taken and certain pitfalls to be avoided.  It is possible to identify characteristics which indicators ought to have. 

This Guide, drawing mainly on experience in other countries, provides assistance in choosing indicators, warns about the pitfalls and outlines the characteristics of good indicators.  It describes what managers can do to select the right financial and non-financial performance indicators for their organisation.  Broadly speaking, that advice holds good for indicators of individual performance too.  The Guide provides a common and consistent set of definitions and terms which enable managers at all levels to get involved in improving performance, building on the partnership approach which has been central to the delivery of successful public services.

The Guide begins with a short description of the Management Information Framework, explaining its role at the heart of the SMI process and the role of performance information in that context.  It shows how indicators are a vital part of such important initiatives and operations as PMDS, the Programme for Prosperity and Fairness, Quality Customer Service and the National Development Plan/Community Support Framework.  The core of the Guide is Section 3 “Getting it right for you” which provides advice on how to  select, develop and use performance indicators. It discusses some limitations, constraints and obstacles.  The advice is supplemented by an Appendix and Glossary which explain the meaning of terms commonly used in performance reporting.   

2.       The Management Information Framework (MIF) 

2.1   Background

“Delivering Better Government” (1996) called for the development in Departments of a “generic model” (later renamed “Management Information Framework”) for an improved financial management system which would:

Support management decision making on programme evaluation and resource allocation; and,

Serve existing accounting and reporting needs of Departments.  

The MIF is a change programme at the centre of reforms to improve the strategic and business plans of Departments, and facilitate the development of better performance information and management.  The MIF is the hub that helps turn the “wheel” which should, overtime, deliver the reforms of the Strategic Management Initiative.  The SMI Working Group report “ Financial Management in a Reformed Public Service” (July 1999) explained that the MIF should:

Ø       Support the Strategic Management Initiative process

Ø       Provide a coherent and consistent mechanism within which the various elements of the financial system may function in a co-ordinated way

Ø       Facilitate the use of financial and non-financial performance indicators

Ø       Support the results driven SMI process, in particular the                              assessment of performance against the Statement of Strategy, in the context of increased levels of delegated responsibility and accountability. 

Each Department now has a statutory obligation under the Public Service Management Act 1997 to produce Strategy Statements, which are supported by annual business plans, and each Department has been tasked to develop a performance management and development system as part of the performance management framework, under the Strategic Management Initiative.  Whilst improved performance management and development seeks to improve human resource management, including competency and skills required to meet challenges of the 21st Century, the MIF reforms will help improve financial and non-financial data management systems, to provide managers with better information for improved decision taking.

The vision of the SMI Working Group was that the new information systems should accommodate Departments’ own monitoring and evaluation needs, as well as the information needs of central Departments and external financial reporting obligations.  Financial systems should be designed to reflect the way the organisation is managed, the budgetary control system including financial delegations (whether by cost-centre control or otherwise) and the need to report on performance to internal and external stakeholders.

2.2. Putting performance information into context  

The Strategic Management Framework                                  

The context for developing organisational performance indicators and measures in Departments and Offices is the Strategic Management Initiative and the linking of Departments’ Strategy Statements to their Business Plans and Customer Service.

The purpose of performance indicators and measures is to provide meaningful information to internal and external stakeholders (some listed below) so that they better understand the work of the Department and whether the organisation is delivering value for money:

  Key Stakeholders

                   External                                                  Internal

The Oireachtas and the Citizen                         Government

          Comptroller and Auditor General               Managers and Employees

Customers                                                     Trade Unions

Trade and Industry

Commentators

Press and Media

Other Governments

European Union

The information, both financial and non-financial, will invariably be about the allocation of resources, the use of resources and results achieved from those resources so that the performance of the Department can be better assessed by Stakeholders.

In providing the link between Strategy Statements and Business Plans, good performance information should provide the opportunity for managers at all levels to plan and take responsibility for improvements in performance throughout the organisation.   In designing and selecting performance indicators and measures, managers will need to take into consideration the requirements of the Strategic Management Initiatives, including Delivering Better Government and those issues which cut across all Departments and Offices such as the National Antipoverty Strategy, National Children’s Strategy and the Programme for Prosperity and Fairness.  Where relevant, Departments should have regard to the performance indicator requirements for the National Development Plan and the Community Support Framework.   Departments will also need to pay particular attention to the identification of customers’ and clients’ interests and needs with a view to improving service delivery, having regard to the Department’s Customer Service Action Plan under the Quality Customer Service Initiative.

Performance Framework:  Indicators link strategy to action and results

Within the context of the MIF and the Strategic Management Initiative, performance indicators and measures link the allocation and use of resources (inputs) to the achievement of organisational objectives and strategic outcomes.

The SMI strategies determine how Departments should define inputs and outputs, allocate and use resources effectively and efficiently to achieve business outputs and outcomes as defined in Business Plans and Department’s Strategy Statements.

2.3     Departmental Strategy Statements

Under the terms of the Public Service Management Act, 1997, there is a statutory requirement on all Government Departments and Offices to produce a strategy statement every three years, or within six months of the appointment of a new Minister.  Strategy Statements must set out the key objectives, outputs and related strategies (including the use of resources) of the Department or Office concerned.

2.4     Business Plans

In July 1998 the Implementation Group of Secretaries General issued guidelines to apply across the civil service in relation to the business planning process.  With regard to the business plan format, the main elements required of business plans are:

 A degree of consistency fostered by a common template, to facilitate comparison and co-ordination at the level of the whole organization.

 The specification of business objectives for the division, clearly linked to higher level goals and strategies outlined in the statement of strategy

Identification and listing of divisional outputs to achieve these objectives

Identification and outlining of the expenditure implications of required objectives and outputs, and of support services resources required.  

The specification of individual/team responsibilities for achieving the objectives and outputs.  

Performance indicators to facilitate the monitoring of progress against objectives and targets.  

An identification of linkages, both inter- and cross-departmental, and how these are handled

Identification of Quality Customer Service implications of the identified objectives and outputs as appropriate

2.5              Customer Service and Delivery 

All departments were asked to complete Customer Action Plans (CAPs) by 1 April 2001.  One of the fundamental themes of Delivering Better Government (1996) is the “achievement of an excellent service for the Government and for the public as customers an clients at all levels “.  The importance of developing better customer service standards is also reinforced by the terms of the Programme for Prosperity and Fairness (PPF) which state:

“Enhancing performance is aimed at improving service standards.  Improved standards of service follow from a strong focus on the needs of recipients, the setting of challenging standards in service delivery, and making the best use of available resources.  In this context, it is essential to provide for consultation with, and feedback from, both the providers and the users of services in order to identify the required improvements and validate the progress being made subsequently to improving service delivery.”       

This approach is underpinned by the provision under the PPF for a 4 per cent pay increase in 2002, which will be paid in return for implementation of key modernisation objectives, one of which is the “ implementation of challenging service standards set in consultation with the recipients of the service.”

Action Plans should recognise the importance of the internal as well as the external customer and clearly detail the service standards which customers can expect over the term of the plan.  In line with the terms of the Programme for Prosperity and Fairness, specific performance indicators are to be set at sectoral and organisational levels for the achievement of key modernisation objectives.  The indicators for Quality Customer Service (QCS) have been agreed by the Strategic Management Initiative Implementation Group as part of the overall indicators for the Civil Service.

In line with terms of the PPF, specific performance indicators are to be set at sector and organisational levels for the achievement of Customer Service Action Plan objectives.  The Civil Service sector indicators for the QCS have been agreed by the SMI Implementation Group as part of overall indicators for the Civil Service and are set out in Appendix A.4 of SMI/QCS Working Group, Practical Guide for the Development of Quality Customer Service (QCS) Customer Service Action Plans (2001-2004) by Departments and Offices, (December 2000).

2.6     Other Applications for Performance Indicators  

Other areas where performance indicators are required include the Performance Management and Development System, the Programme for Prosperity and Fairness and the National Development Plan/Community Support Framework. 

2.7     Performance Management and Development System (PMDS) 

The Performance Management and Development System (PMDS) is an essential “pillar” of the Strategic Management Initiative and applies to all Civil Servants, at every level, in each Government Department and Office.  The PMDS system was negotiated and agreed by all Civil Service Unions at General Council.  (General Council Report 1368).

PMDS describes the way the Jobholder’s work performance’ career and development needs are managed, bringing greater clarity about the Jobholder’s role, and what is expected of the individual as an employee.  A key requirement of PMDS is that each employee discusses and agrees objectives and targets at the start of the year which are monitored, reviewed and updated as the year progresses.  It provides the essential link between individual and organisational objectives and performance by providing a system for agreeing a set of key performance indicators for each individual.  It identifies the role of the Principal Officer, as head of section, as pivotal in shaping the longer-term objectives and performance of staff.      

A key component of the new system is that each officer in every Civil Service Department makes a contribution to achieving the overall strategic aims of the organisation as set out in the Strategy Statements and Business Plans.  In this way every staff member should get involved in contributing to improved performance.

The PMDS distinguishes between short and longer-term (i.e. the next three years) objectives of each individual, and emphasises that longer-term objectives should identify the important results that derive from day-to-day activities.  Individuals’ longer-term objectives should be a direct subset of the longer-term objectives of each head of section (Principal Officer) contained in the Work Programme.

The longer-term objectives translate the Strategy Statement and Business Plans into a set of actions that each Principal Officer area must undertake in order to achieve the high level aims of the organisation.

PMDS Guidelines recommend using the “SMART” technique to obtain concise Key Objectives and Key Performance Indicators: 

    S        -        Specific

    M       -        Measurable in quality and quantity

    A        -        Achievable, but which also challenges

    R        -        Relevant to the objectives of the section

    T        -       Time bound.  Objectives must be achieved

                       within an agreed timeframe

Guidelines also explain the need to identify standards by which performance of the individual will be measured, and that Key Performance Indicators should be directly related to each of the objectives agreed at the start of the year, and updated as the year progresses.  Performance indicators should focus on the standards expected to be achieved in terms of quality, quantity and time (essentially non-financial indicators and measures of performance) and the need to identify Critical Success Factors including key dependencies/relationships with other Departments and Organisations.

PMDS also provides a competency framework for developing personal and organisational skills and effectiveness, as well as training and development plans which should be tailored to organisational needs.

       2.8      The Programme for Prosperity and Fairness   

The Programme for Prosperity and Fairness (PPF) establishes clear links between public service pay and the implementation of the modernisation programme at sector and organisational level.  Section 1.4 of the PPF outlines the modernisation of the wider Public Service with the overall emphasis on embedding the strategic management approach through continued development of strategy statements, business plans, and service delivery targets.  In order to measure performance towards achieving these objectives over the lifetime of the programme it is necessary for Departments and Offices to develop and continuously update a comprehensive series of performance indicators deriving from key objectives.

While performance indicators should be customised to reflect each Department’s/Office’s particular circumstances and stage of development in the modernisation programme, they should, at a minimum, reflect the common change agenda facing the Civil Service as a whole.  (The key actions and targets of this common change agenda can be found in SMI Implementation Group 3rd Report, Appendix II, March 2001).

The progress achieved at 1 April 2002 at individual organisational level is to be reported on and assessed by 1 October 2002.  The process for verifying that:

(i) The performance indicators are satisfactory and sufficiently challenging vis-à-vis the key objectives set out in PPF, and

(ii) The reported progress at individual level has been achieved involves the assessment by the Civil Service Quality Assurance Group.  Payment of the final phase of 4 per cent under the PPF will be conditional on satisfactory progress being made on achieving the performance indicators.

2.9     National Development Plan (NDP)/Community Support Framework (CSF), 2000 to 2006  

Performance indicators are used extensively to assess progress under the Operational Programmes in the NDP/CSF.  The performance indicator system is based on a paper drawn up by the then CSF Evaluation Unit (now NDP/CSF Evaluation Unit) in October 1999 entitled “CSF Performance Indicators: Proposals for 2000-2006 Programming Period”.  This paper draws on EU Commission guidelines on the use of performance indicators for EU Structural Fund Programmes and on experience with the use of performance indicators in Ireland in the earlier 1994 to 1999 CSF programming period.

Given its context, the paper is relevant to the development of performance indicators for public expenditure programmes or schemes.  The indicator 

system presented is based on a threefold typology of performance indicators, namely output, result and impact indicators.  The paper outlines the characteristics of good performance indicators and deals with the issue of target setting and revision.

The NDP/CSF Evaluation Unit has an ongoing advisory role in relation to performance indicators in the NDP.

  3. Getting it right for you: Getting involved in selecting, developing, implementing and using better performance information 

This section begins with some basic guidance for anyone trying to establish a set of performance indicators.  It then treats in more depth the issues facing managers who will need to link individual performance indicators with organisational goals before considering the role of the business manager in selecting organisational indicators and measures.  Finally, recognising that organisations usually have more than one goal, it mentions some commonly used techniques for balancing competing demands.  The reader should refer to the bibliography for further information on that.  

Part 2