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This first appeared as an ASPANET On-Line column in November 2001.

Connecting Promises to Performance
By John Kamensky

The biggest challenge of every Managing for Results system is creating an environment that consistently focuses the day-to-day office conversations of every employee around customers, performance, and results. This not just an exercise in leadership, it is fundamentally shaping the essence of the organization - its cultureto - to manage for results by putting in place a set of incentives that shape behavior. At its simplest, it means setting clear expectations for success, and rewarding good performance. This month, I'll discuss a catalytic mechanism for doing this - the use of a balanced set of measures that reflect an organization's strategy. Next month, I'll discuss a more specific tool - the use of performance contracts with senior managers.

Recent studies of federal agencies show plenty of opportunity for improvement in getting employees to focus on results, customers, and performance. The General Accounting Office in early 2001 reported that results of a governmentwide survey showing most managers do not use performance information to make their management decisions. A 1999 OPM survey of executives supports this. Less than two out of five senior federal executives say their pay or bonuses are linked to the performance of their organization. Even fewer saw customer satisfaction or employee issues as a link. A broader OPM survey in 2000 reinforces this - it found that less than one third of employees were clear on what constitutes "good performance."

But some federal agencies do much better than others. These agencies tend to put in place clear "line of sight" measures that directly tie frontline employees with the goals of their organization. Many of these systems are rooted in the use of a set of measures that view good performance through the lens of the mission, the customers, and the employees. For example, the Department of Veteran's Affairs is making a concerted effort to better communicate to its employees and executives what constitutes good performance. It is emphasizing the importance of mission results, customer satisfaction, stakeholder feedback, and teamwork. As a result, its OPM employee survey responses to the question about defining "good performance" increased more than 11 percent between 1999 and 2000. The IRS, for example, took similar approaches to defining good performance and had similar employee reactions.

What Are Balanced Measures? Balanced sets of measures - using the Norton-Kaplan Balanced Scorecard or other similar methodology – is a strategic performance management approach widely used in the private sector to link the day-to-day performance of individuals to the strategies designed to achieve broader organizational goals. It is a mechanism that drives change by measuring future-oriented activities that are tied to aggressive improvement targets.

Bain and Company, an international consulting firm, conducted a survey of companies in 1999 and found 42 percent use balanced measures. The Conference Board recently compared the stock performance of private sector companies that use of a formal strategic performance management system, such as Balanced Scorecard, with companies that do not. It found that 52 percent of those that do experienced greater-than-average stock performance, compared to 26 percent of companies that did not. Likewise, only 18 percent of those companies that use such a system had below-average stock performance while 31 percent of those that did not.

Progress in Connecting Performance to Results in the Federal Government. The use of a balanced set of measures as a way of connecting goals to frontline performance is gaining acceptance across the federal government. The experience of "early adopters" shows that linking individual performance assessments to agency results has led to improved organizational performance. Many of the early adopters were inspired by the Norton-Kaplan "balanced scorecard" approach which they adapted for their use.[1] A 1999 assessment of best practices in the public sector showed real promise in using variations of the Norton-Kaplan approach. In these cases, the initiative was driven by top agency leaders wanting to use this approach as a tool to focus collective agency executive attention on what is most important to the leadership.[2]

A 2000 review of 15 federal organizations that had at least one year's worth of experience in using in balanced measures by Dr. Jake Barkdoll found that they were more commonly used in staff functions than in programmatic activities. For example, the Procurement Executives Council has adopted this as away of improving procurement functions. He also found that the use of balanced measures stemmed from word of mouth across agencies and between senior executives, not because of any official action. While most measures were at the organizational level, and not cascaded down to individuals or used as a basis for distributing awards, two-thirds still reported that scorecards are important management tools. Those that did link organizational performance to individuals and awards found the use of scorecards more valuable.

For the past year, Dr. Barkdoll has facilitated a monthly Washington-based group of several hundred federal employees who use this opportunity to learn from each other what is going on in the arena of managing agency operations through the use of a Balanced Scorecard approach. It creates an opportunity for those who have not made up their minds as to whether this is a useful approach to come and learn, and for those that have begun using a balanced scorecard approach to exchange experiences and lessons learned. Each month, an early adopter agency presents its story and lessons learned. Summaries of these stories and some of the group discussion comments are now available on the ASPA website.

These include:

These agencies are only some of the early adopters of balanced sets of measures that link executive and individual performance to strategies designed to meet overall agency goals. New case studies will be added each month.

Some lessons learned. Based on the state of the art in federal agencies, following are some of the lessons learned to date:

Incentives. You have to link desired performance to units, individuals, and awards before anyone will care about the overall performance management system. One way to start is by using written performance agreements at the beginning of a rating cycle to clearly convey expectations. This will work only if you define and agree upon what is “success” up front, not after the rating cycle. If you start this at the executive level, it quickly cascades throughout the organization as executives then negotiate similar agreements with their subordinates. For example, in the mid-1990s the Postal Service linked its executives’ pay bonuses to targets around its balanced measures and overall performance increased over 15 percent in the first year.

The Measures. The goal should be to create a system of performance measurement that is seen as empowering managers with information that they can use to solve performance challenges, not as some system that is used to control them. To do this, requires live data, available to all. Also, the frontline managers must feel some ownership of the data for its to be seen as valid. Also, key measures need to be developed that link what employees do to the overall mission of the agency – line of sight measures -- so they can link what they do to the goals of the agency overall. For example, the Public Buildings Service makes key measures available for every building to its inventory to all employees. Most organizations found that until this happens, performance measurement is seen as feeding a reporting system for headquarters, not something useful to themselves.

Some Design Options. There are a number of design options that need to be addressed, such as: ensuring the rating year for individuals and the performance reporting cycle for the organization are the same, the relative weight assigned to each performance element when judging overall success, third party administration of data to ensure validity, etc.

To date, the Bush Administration has not officially endorsed the use of balanced measures but this approach can be a useful in developing a framework for meeting the expectations laid out in the President's Management Agenda.

[1] Citation to HBR article; also to Monahan book.

[2] NPR report.