Performance-Based Management

Headnote

Grant Thornton

New mandates for transparency and collaboration, plus a cash-strapped public sector that must reduce costs- all require balanced performance data. At Grant Thornton LLP, we think that performance-based management delivers that balance to leaders, managers and taxpayers alike.

Balanced performance measurement

Budget decisions based on cost alone can shift too many resources away from effective, valued government programs while taking too little from ineffective ones. Decisions based on a program's outcomes alone fail to consider whether it is costeffective. Instead, sound government decisions depend on a balanced blend of financial/cost data and performance measures, supported by sound internal controls and indicators of process variation.

Financial/cost data represent the amount of money governments pay for resources (people, materials, etc.). Performance measures include results of government work and goal achievement, along with process or operational measures like workload, variation, which is a statistical measure of the deviation from normal process performance, shows the capability of operations to produce outputs efficiently and effectively. Good internal controls help to reduce unwanted variation, both in processes that produce services and those that measure their performance. All four types of measures present a balanced, multidimensional view of performance- ideal for citizens, stakeholders and lawmakers, each group having its own information needs.

Performance compared with what? Further, the results of a single entity or program are not a balanced presentation of performance. Measures must be compared with something, or else they exist in a vacuum. These comparisons include with another entity that does the same thing, with alternative approaches or simply with a returnon-investment (ROI) calculation. The outcomes of such matchups can include who gets the lead mandate, better processes or more resources for most cost-effective programs.

Govemmentwide performance. Comparing performance among entities engaged in similar missions does not have to mean competition for resources. Most citizens do not know or care which public sector entity provides a service. To them, it is just "government." This is a compelling argument for collaboration among like entities to produce balanced performance measures of govemmentwide results and outcomes. Such collaboration will deliver better, more cost-effective services and increase the faith of citizens in their government.

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