Week 13: Performance Management and Performance Budgeting

1. 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

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

3. 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)

4. 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 Outcomes Orientation: Challenges

5. 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

6. 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

7. 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

8. Integrated Planning at CSU, Sacramento Planning Assessment Resource Allocation

9. 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

10. 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.”

11. 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: • What if objective measures of performance diverge from perceived measures (citizen satisfaction levels)? • Does better performance result in higher level of citizen satisfaction?

12. 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

13. 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

14. 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

15. 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

16. 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???

17. 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

18. 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

19. 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?

20. 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?

21. 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”

22. Preview of Week 14 • Workbook on performance measures • Last memo due (not counting portfolio reflection) • performance measures • Class exercises on developing performance measures