Performance measurement: an essential management tool.(Best Practices)

In 2001, GFOA's Committee on Governmental Budgeting and Fiscal Policy formed the Subcommittee on Performance Management to articulate a performance management initiative for the association. Drawing on their own collective expertise, advisors to the Budget Committee, and the recommended practices of the National Advisory Council on State and Local Budgeting, the subcommittee developed a plan that was presented to the GFOA Executive Board and adopted with revisions in March 2001. The purpose of the initiative was to formalize GFOA's commitment to promoting the integration of performance measurement into the budget and strategic planning processes.

To reinforce the initiative, GFOA allocated staff resources, provided training opportunities, promoted collaboration with other organizations, and expanded the importance of performance measurement in the Distinguished Budget Presentation Awards Program. Another natural result of the initiative was the subcommittee's revision of a 1994 recommended practice on performance measurement. The revised recommended practice, "Performance Management: Using Performance Measurement for Management Decision-Making" was adopted by the GFOA Executive Board in February 2002. (1) This article summarizes the guidance contained in this recommended practice and describes how one local government has put it to work.

A BEST PRACTICE ROADMAP

The intent of the revised recommended practice is to change management's focus from merely reporting performance measures to actually making decisions based on those measures. When linked to a government's mission and short- and long-term goals and objectives, performance measures can become useful management tools in the budget and strategic planning processes.

As stated in the introduction (background) of the recommended practice, state and local governments should develop and manage services, programs, and resources as efficiently and effectively as possible. When linked to a government's mission, goals, and objectives, performance measurement can be used to identify financial and program results, evaluate past resource decisions, and guide future decisions about resource allocation and service delivery.

"[GFOA] recommends that program and service performance measures be developed and used as an important component of the long-term strategic planning and decision-making process which should be linked to governmental budgeting," the practice reads. Governments should measure program outcomes and provide for resource allocation comparisons over time. Performance measures should be limited to a number and degree of complexity that can provide meaningful assessment of key programs, and they should be designed to motivate staff to contribute toward improvement.

For governments in the early stages of incorporating performance measures into their planning processes, the recommended practice suggests some steps to take toward this goal. It also provides some essential guidance on advanced performance measure development. For example, "[governments] should develop multiyear series of efficiency indicators to measure the efficiency of service delivery within programs" and "[governments] should develop multiyear series of quality or outcome indicators to measure the effectiveness of service delivery (are accomplishments being met?) within programs." Governments should use this information in resource allocation decisions and report the extent to which program goals have been accomplished. Regional performance measurement initiatives should adopt common definitions of key efficiency and effectiveness measures to allow intergovernmental comparisons.