Week 12: Performance Management and Performance Budgeting • Discuss Eureka exercise • Review mid-term • Conceptual Origins of Performance Management • Government Performance and Results Act (GPRA) • Strategic Planning • Performance Budgeting • Class Discussion Questions

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

Key Tenets of Performance Management • Mission-driven organizations and decision making • Outcomes orientation (as opposed to inputs) • Customer and service focus • Deregulation/flexibility for program managers • Decentralization • Entrepreneurial • Accountability • Incentives and rewards • Strategic Plan linked to budget (performance budgeting) • Changing organizational culture

Outcomes Orientation: Challenges • Outcomes are hard to measure • Outcomes are usually not controllable by any one agency • Outcomes may not be positive • Do politicians really want to know the outcomes of their pet projects?

Inputs Process Outputs Outcomes

GPRA (1993) -- Components • Strategic Plans • Annual Performance Plans – performance, measures, resources for each activity • Annual Performance Reports – actual performance compared to goals • Performance Budgeting Pilots • Managerial Flexibility Pilots – staffing levels, compensation, budget transfers

GAO Assessment of 2000 GPRA Performance Plans • Major Strengths: – results-oriented goals and quantifiable measures are frequently used to address program performance – some good use of intermediate measures (e.g. outputs) to show interim progress – use of baseline and trend data to identify past performance is widespread – program strategies are often discussed in relation to the achievement of performance goals

GAO Assessment of 2000 GPRA Performance Plans • Recommendations for improvement – better articulate a results orientation – coordinate crosscutting programs – show the performance consequences of budget decisions – clearly show how strategies will be used to achieve results – build the capacity within agencies to gether and use performance information

GPRA -- Prospects for Success • new President -- less priority?

• unrealistic expectations are being lowered • lack of interest in Congress in oversight and appropriations • appropriations committee structure doesn’t match programs • need to link evaluation research with performance measures to help assess impact of complex programs • who are the champions of the process?

• benefits planning, internal management, and public image, even if it doesn’t directly affect budgets • will performance reports aid public accountability?

Strategic Planning • 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

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

Performance Budgeting in Theory • improvement over line-item budgeting, which ignores program and policy for input focus • focus on performance, not compliance • connects resource needs to results (tight links) • requires restructured accounting systems to align budget structure with program areas • integrates performance information into budget structures • provides for informed choices: impact of $$ support levels • improves accountability • improves management

Performance Budgeting in Practice • hard to define and measure outcomes • hard to tie dollars to outcomes • very limited knowledge of cause/effect relationships • must fit into existing line item budget structures • lack of good cost data at level of program outcome • loose linkages with budget at best • informs decision making only at “macro” level • greatest benefit is internal to organization • many factors outside control of agency

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

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?

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?

Preview of Week 13 • Guest Speaker: Teresa Rocha, Department of Corrections • Workbook on performance measures • Last memo due -- performance measures • Class exercises on developing performance measures