Treasury Board of Canada (reference below) defines performance measurement as the “process and systems of selection, development and on-going use of performance measures to guide decision-making” where a performance measure is defined as a “qualitative or quantitative means of measuring an output or outcome, with the intention of gauging the performance of an organization, program, policy or initiative respecting expected results.”
Principles for an effective performance measurement framework
In his 2011 blog post, Scott Hodge (reference below) sets out ten principles to help frame the development of performance measures.
“Many organizations have had difficulty establishing a clearly defined set of performance measures and indictors, and even more challenges trying to operationalize their performance measurement framework (PMF). It all sounds easy – set goals, identify key indicators to track performance, determine data sources to populate the measures, analyze the data, and make changes along the way to re-align performance to the goals and objectives. As a guide, here are a set of principles that help frame the development of performance measures:
“Principle #1 – The measurement system must be tied to the vision of the organization. The aim and purpose of a PMF is to gauge the organization’s performance and to ensure the organization is moving in the right direction to realize that vision.
“Principle #2 – The measures must be balanced (comprised of financial and non-financial data). For many government organizations, one of the key concerns for senior managers is whether their unit will lapse funding at the end of the fiscal year. While financial measures are often among the easiest to identify and collect data on, performance measures must reflect all aspects of the organization. Otherwise, you will not have an effective reflection of the organization’s overall performance, and any decisions made based on that data may lead to operational changes that might not be the most appropriate course of action.
“Principle #3 – Measures must be a mix of process data and outcome data taken over time. The measurement system must reflect all programs and activities the organization conducts, both internal and external. It is not sufficient to measure just past results. It is essential to also analyze what the processes are generating on an on-going basis. Process data in time order provides a ‘lagging’ indicator of the organization’s operational or output efficiency, but can also serve as a ‘leading’ indicator – providing a signal on whether policies and programs are contributing to the targeted outcomes and the intended results.
“Principle #4 – Measures must be based on operational definitions. Good measures are based on an organization-wide common language with clear and concise definitions of key organizational policies and terms. A common lexicon leading to a unified use and interpretation of the key terms by staff must be attained before performance measurement information can be effectively used to assist and facilitate decision-making.
“Principle #5 – Measures must be within the organization’s sphere of influence. The measures must reflect the activities undertaken by the organization. Although it may be useful to measure pertinent issues outside the organization’s domain, they do not assist in determining how the organization is performing from a strategic perspective.
“Principle #6 – Measures must be dynamic, relevant and timely. The measurement system should provide meaningful, relevant, and timely information. Tracking performance leads to increased knowledge and appreciation of your operational environment. As your knowledge of the organization’s performance improves, each of the measures will need to be revised or changed to incorporate this new knowledge and understanding. Continual review of performance indicators is essential to ensure you have appropriate performance information to support decision-making, especially in a changing environment. Dynamic measures serve as indicators of current performance and assist in the prediction of future performance.
“Principle #7 – Measures must be interconnected (i.e., always reported collectively, never singly). The measurement system is essentially a report card on the organization’s operational performance. The causal links between outputs and outcomes is explicitly displayed in logic models and strategy maps. Those same causal linkages should be reflected in the performance measures. If measures are analyzed individually, you lose the understanding and appreciation of the interactions between programs and the improvement potential that is inherent in improved coordination. This is why many organizations have established performance dashboards and scorecards for analyzing and reporting purposes.
“Principle #8 – Senior Management is accountable for the measures. Senior management is ultimately responsible and accountable for the organization’s PMF and the related processes and practices. Employees will remain responsible for data collection and the initial interpretation and analysis of the performance information. However, the accountability for the performance of the organization lies with the senior managers and, as such, they must take responsibility and demonstrate active leadership in supporting the performance measurement practices by using the performance information in their communications with staff and in their decision-making.
“Principle #9 – Measures must be limited in number but still provide a holistic view. Many organizations develop detailed logic models and then identify 2-3 performance measures for each output and outcome in the model. By the end of the initiative, the team has identified an unmanageable number of performance indicators. Instead, consider your outputs and select the key outputs that are most vital – then select the outcomes where you have the greatest level of influence. Establish key measures that gauge the efficiency in which you generate the outputs and track the progress in achieving the intended outcomes. If you develop too many measures, you run the risk of focusing too much attention on the measures and not enough on the organizational performance. As a general rule of thumb, you should limit your PMF to approximately 20-25 key measures.
“Principle #10 – Measures must be communicated and documented. Employees from every level of the organization should be able to study the measures for themselves to determine how the organization is performing. It is not enough to simply communicate the results; employees must be actively engaged and allowed to use the performance information in their own decision-making, in contributing to policy and program changes, and for their continuous process improvement efforts.”
See also: Performance Reporting.
Treasury Board of Canada Secretariat, Results-Based Management Lexicon, at https://www.canada.ca/en/treasury-board-secretariat/services/audit-evaluation/centre-excellence-evaluation/results-based-management-lexicon.html, accessed 8 October 2017.
Scott Hodge (2011), 10 Guiding Principles for an Effective Performance Measurement Framework, at http://www.deltapartners.ca/blog/10-guiding-principles-for-an-effective-performance-measurement-framework/, accessed 8 October 2017.
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Page created by: Ian Clark, last modified on 8 October 2017.
Image: From prweb at http://www.prweb.com/releases/2013/3/prweb10512423.htm, accessed 31 December 2015.