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PART I
Setting the Scene
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CHAPTER 1
Background
Iam often asked āAre KPIs as relevant for government and non profit agencies as they obviously are for the private sector?ā My answer is always an unequivocal yes. I would even go on to say that KPIs could have a more profound impact in government and non profit agencies as resources are scarcer and staff can easily be diverted away from what is important by the politics inherent in such institutions.
Are Agencies Really Non Profit Agencies?
I was asked by a member of my golf club not to refer to government and non profit agencies as not-for-profit or non profit agencies because it sent the wrong message. It certainly does. These agencies delivering services around the world are running their organization utilizing all the best management practices they can muster.
A surplus or profit should never be considered wrong in these entities as surpluses are an essential part of an agency's longevity. These surpluses or profits are required for:
- Funding years when uncertain revenue will be less than necessary.
- Reinvesting in fixed assets because depreciation will never be enough to fund replacement assets.
- Funding of new initiatives that will make a breakthrough in performance management, which will lead to further efficiencies.
Thus, for all those working in government and non profit agencies, no offense is meant by the title of this book. Bear in mind that we had to pick a title that was brief and commonly understood.
Measurement in Government and Non Profit Agencies
For measurement to work in government and non profit agencies, there has to be a radical change in the way performance management and measurement is approached and addressed.
Without tackling the common flaws in performance measurement, without a sound understanding of the great management thinkers of the last 60 years, and without a sound grip of the performance management foundation stones, key performance indicators (KPIs) will simply flounder. Hence, I have decided to discuss these three issues before I venture into the detail of KPIs and how they can make a difference to the operations of government and non profit agencies.
Government and non profit agencies were among the first to embrace the balanced scorecard. Part of the reason for this, I believe, is that management in these two sectors keep abreast with current trends more than their counterparts in the private sector. They are, thus, more aware of the changes in business thinking.
Measurement is just as important in government and non profit agencies, as the scarcity of both people and financing means any wastage is more acute. In addition, the impact of better alignment to the organization's strategy and critical success factors will benefit many.
Unintended Behavior: The Dark Side of Measures
Measurement initiatives are often cobbled together without the knowledge of the organization's critical success factors and without an understanding of the behavioral consequences of a measure. As is mentioned in Chapter 2, it is a myth of performance measurement that most measures lead to better performance.
Every performance measure has a dark side, a negative consequence. The key is to understand it. Well over half the measures in an organization may be encouraging unintended behavior. This book will repeatedly drive home the importance of understanding this dark side and selecting fewer measures, as well as selecting those with a minimal negative consequence.
How performance measures can go wrong can be illustrated by two examples.
Example: City Train Service
A classic example is provided by a city train service that had an on-time measure with some draconian penalties targeted at the train drivers. The train drivers who were behind schedule learned simply to stop at the top end of each station, triggering the green light at the other end of the platform, and then to continue the journey without the delay of letting passengers on or off. After a few stations, a driver was back on time, but the customers, both on the train and on the platform, were not so happy.
Management needed to realize that late trains are not caused by train drivers, just as late planes are not caused by pilots. The only way these skilled people would cause a problem would be either arriving late for work or taking an extended lunch when they are meant to be on duty. Management should have been focusing on controllable events that led to late trains, such as the timeliness of investigating signal faults reported by drivers, preventative maintenance on critical equipment that is running behind schedule, and so on.
Example: Accident and Emergency Department
Managers at a hospital in the United Kingdom were concerned about the time it was taking to treat patients in the accident and emergency department. They decided to measure the time from patient registration to being seen by a house doctor. Staff realized that they could not stop patients registering with minor sports injuries but they could delay the registration of patients in ambulances as they were receiving good care from the paramedics.
The nursing staff thus began asking the paramedics to leave their patients in the ambulance until a house doctor was ready to see them, thus improving the āaverage time it took to treat patients.ā Each day there would be a parking lot full of ambulances and some circling the hospital. This created a major problem for the ambulance service, which was unable to deliver an efficient emergency service.
Management should have been focusing on the timeliness of treatment of critical patients, and, thus, they only needed to measure the time from registration to consultation of these critical patients. Nurses would have thus treated patients in ambulances as a priority, the very thing they were doing before the measure came into being.
To avoid putting in a measure that will not work you need to:
- Set up a trained team who approve all measures. This team should be trained in all aspects of performance management and measurement that is discussed in this book and in others such as Dean Spitzer's Transforming Performance Measurement.1 If you want chaos, allow teams and managers to invent their own measures. In that case, you may as well close this book now as it will make little impact.
- Ensure that you are measuring something that matters. The key here is to understand the critical success factors. In the hospital situation, it was the treatment of critical patients, hence we measure the timely treatme...
