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4 Environments for Effective Decision Making BACKGROUND Ultimately, of course, good decisions are made by good decision makers armed with credible information, insights from analysis, and appropriate skills. Information and processes are some of the ingredients needed. The environment within which decision makers employ these ingredients is also important because it will affect the free flow and interchange of information and conclusions. As stated in Chapter 3, best-practice organizations establish a framework of processes, required information, and valuation criteria that aligns the individual goals, objectives, and values of its decision-making and operating groups so as to achieve the organization's mission. A framework also helps to create an effective decision-making environment and to provide a basis for measuring and improv- ing the outcomes of facilities investments. This chapter first discusses the role of open communications, trust, and credible information in creating effective deci- sion-making environments. The focus then shifts to the use of performance mea- sures, continuous evaluation and feedback processes, accountability, and incen- tives. The chapter concludes with principles and policies from best-practice organizations. OPEN COMMUNICATIONS, TRUST, AND CREDIBLE INFORMATION Communication can be defined as "the science and practice of transmitting information, normally through the use of symbols, in a manner that succeeds in 62

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ENVIRONMENTS FOR EFFECTIVE DECISION MAKING 63 evoking understanding."1 It is, therefore, more than a good presentation or a dy- namic messenger. Communication is about the quality of the message, the cred- ibility of the information, and the deliberations that ensue. Effective communica- tion among individuals, business units, or a range of stakeholders can be difficult to achieve because there are many opportunities for distorting the message, infor- mation, and deliberations. Barriers to effective communications include lack of a common terminology; lack of trust in the source of information; poor interper- sonal relationships; differing individual and group values; and unexpressed as- sumptions. Terminology is a factor because different people often interpret the same words differently based on their professional training, experience, or values. If the source of the information is not credible, the believability of the overall mes- sage may be called into question. How people receive a message will depend, in part, on their past experiences with the person delivering the message as well as their relationships within and to the organization. Assumptions come into play when people take for granted that others see the situation in the same way and will have the same reaction. In best-practice organizations, effective decision making for facilities invest- ments is related to managing a free exchange of information among the various stakeholders, particularly those who might be skeptical about a proposed invest- ment. Open communications ensure that those who need to know and who can best critique a proposal have access at a sufficiently early stage to provide infor- mation and insights that can be constructively used to produce a better proposal. The more open the process, the more likely it is that errors in fact or methodology will be uncovered.2 Trust--unquestioning belief in and reliance on someone or something--is widely understood to be important to the success of almost all forms of human interaction. Building trust is a complex prospect. Trust is fragile. It is difficult to establish and easy to destroy. One incident of poor communication could be inter- preted as deceptive and trust can be lost. One realization that a game has been played wherein one player was less than open and honest can destroy trust. Nu- merous documented, positive transactions are required to build trust (Slovic, 1993). Effective communication is both a top-down and a bottom-up responsibility. Senior executives are responsible for ensuring effective communication of policy decisions and institutional strategies throughout an organization. They must cre- 1Modified from definitions in The New Shorter Oxford English Dictionary, Oxford: Clarendon Press, 1993. 2Closed processes may be required in situations involving the protection of proprietary informa- tion, safeguarding national security, and judicial proceedings, among others. There is always a risk in open proceedings, especially in the public sector, that a multitude of participants with different moti- vations may delay or sidetrack a process.

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64 INVESTMENTS IN FEDERAL FACILITIES ate an environment that encourages a flow of communication from all manage- ment levels without fear of reprisal. Mid-level and line managers lack the posi- tion in the organization to bring all of the relevant stakeholders together and move them in a common direction. Nonetheless, the managers of operating units are also responsible for communicating effectively. It is incumbent on the real estate manager to understand competitive strategy, not on the line manager to understand real estate (O'Mara, 1999). As described in Chapter 3, common terminology and a business case analy- sis are used to foster effective communication among the various stakeholders in discussing proposals for facilities investments. The business case analysis is seen as credible because it is understood and used by all relevant leadership, manage- ment levels, and operating groups. Common terminology and a business case analysis also serve to create a basis for open communications and to build trust. The business case analysis provides a means to review the strategic, qualitative, and quantitative aspects of a proposal and compare it with other proposals. When the analysis is used in deliberations, discussion of the underlying assumptions allows everyone to see where everyone else stands on the proposal, to identify a full range of alternatives, and to discuss their merits and deficiencies in meeting organizational objectives, as opposed to operating unit or individual objectives. Expertise in developing and using analyses and communicating the results per- meates the organization's workforce and culture when all participants use the same information repeatedly. Trust is built among the decision-making and oper- ating groups by ensuring that everyone has access to the same information. Persons interviewed for this study noted that facilities management operat- ing groups had gained or retained credibility and built trust at the institutional level by providing sound information, by incorporating rigor into their analyses, by giving high-quality presentations, and by submitting realistic, reasonable re- quests for investment proposals. Among the specific examples cited were the following: Providing good cost estimates the first time around. The cost estimates were developed using cross-functional teams and reviewed by an internal cost estimator before being presented to the executive board (Dallas-Fort Worth airport). Having the division director who would be responsible for building and operating a proposed facility present the proposal to the board of direc- tors. Having a presenter with operational responsibility and a successful track record increased the credibility of the presentation (Public Service Corporation of New Mexico). Including input from facilities operating and maintenance staff in the busi- ness case analysis (DMJM + Harris). Closing out projects and turning back unused contingency funds. As a

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ENVIRONMENTS FOR EFFECTIVE DECISION MAKING 65 result, members of the facilities management operating group were seen by others in the organization as timely performers and good financial stew- ards. Over time, the group's budget was increased because it was trusted to use the funds wisely (Dallas-Fort Worth airport). Decisions about proposals for facilities investments are linked to organiza- tional mission and take into account the organization's portfolio of facilities. Such decisions, however, are made within a dynamic environment where operational requirements and even the mission of the organization are subject to change. Best-practice organizations use additional framework components--performance measures, feedback processes, accountability, and incentives--to measure, ad- just, and improve decision-making processes, management practices, and the re- sults or outcomes of decisions. PERFORMANCE MEASURES For any organization, it is important to understand why decision-making processes or management practices that had been used led to success or failure, and how that understanding can suggest improvements. The notion of continu- ous process monitoring and feedback is based on the recognition that, however effectively one plans, unintended consequences, unforeseen events, and change will occur. Best-practice organizations measure the results or outcomes of facili- ties investments by establishing baselines3 and performance measures4 to con- stantly monitor and track all aspects of operations and their results in relation to organizational objectives. Performance measures help to identify where objec- tives are not being met, or where they are being exceeded. Managers can then investigate the factors or reasons underlying the performance and make appro- priate adjustments. Best-practice organizations have long used metrics such as internal rate of return, growth or decline in earnings per share, percentage of market share, and the like to measure overall performance in relation to mission and the desired results. However, because such measures may focus on what has happened al- ready--that is, on investments already made--they may not be particularly use- ful for planning for the future or responding to changing requirements. For those purposes, operational measures are required that focus on elements that are im- portant to future financial performance, such as the level of customer satisfaction or the introduction of innovative products, techniques, or technologies. A study conducted in the early 1990s found that Executives also understand that traditional financial accounting measures like 3Defined as a quantifiable point at which an effort began and from which change can be measured and documented (NAPA, 1996). 4Defined as the standard by which to gauge an operation or activity (NAPA, 1996).

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66 INVESTMENTS IN FEDERAL FACILITIES return-on-investment and earnings-per-share can give misleading signals for con- tinuous improvement and innovation--activities today's competitive environ- ment demands. The traditional financial performance measures worked well for the industrial era, but they are out of step with the skills and competencies com- panies are trying to master today. . . . Senior executives do not rely on one set of measures to the exclusion of the other. They realize that no single measure can provide a clear performance target or focus attention on the critical areas of the business. Managers want a balanced presentation of both financial and opera- tional measures (Kaplan and Norton, 1992, p. 71). This particular study led to the development of the Balanced Scorecard (BSC), a conceptual framework for evaluating organizational performance. Over time, the BSC has evolved, but the categories of performance to be measured have remained constant: financial outcomes, internal business processes, customer relationships, and innovation and learning. "Balanced" refers to several qualities of the scorecard. First, there is a bal- ance across the four categories to avoid overemphasis on financial outcomes. Second, it requires both quantitative and qualitative measures. Third, there is a balance in the levels of analysis--from individual and group results to organiza- tional outcomes (Heerwagen, 2002). The BSC approach can be applied hierarchi- cally, beginning with organizational objectives and cascading down to operating units and individuals with successively more detailed objectives and measures at lower levels. Since its introduction, the BSC approach has been adopted and developed for use by many organizations, in the private, public, and not-for-profit sectors. Be- cause it is a conceptual framework, each organization that implements a BSC approach must develop its own strategic objectives and the performance mea- sures needed to evaluate progress toward those objectives. For example, the Mobil North American Marketing and Refining Company identified return on capital used, existing asset utilization, profitability, and profit growth as financial strategic objectives; stakeholder objectives included customer satisfaction in each of the market segments it serves and good relations with its dealers; internal processes included objectives for the performance of facilities, inventory management, and on-time delivery of products of specified quality; learning and group objectives included improving core competencies and skills and providing employees access to the strategic information needed to do their jobs (Kaplan and Norton, 2001). In the case of Charlotte, North Carolina, a public sector municipality, its strategic objectives for financial outcomes included increasing the tax base and maintaining the city's bond rating. Stakeholder relations comprised such objec- tives as increasing the perception of safety, enhancing service delivery, maintain- ing a competitive tax rate, and promoting economic opportunity. Strategic objec- tives for internal processes included improving productivity and increasing

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ENVIRONMENTS FOR EFFECTIVE DECISION MAKING 67 TABLE 4.1 Strategic Assessment Model Matrix of the Association of Higher Education Facilities Officers (APPA) FINANCIAL PERSPECTIVE INTERNAL PERSPECTIVE Facility Operating CRV Index Cycle time Facility Operating GSF Index Average age Capital Renewal Index Backlog Facilities Condition Index Energy usage Needs Index Energy Reinvestment Index CUSTOMER PERSPECTIVE INNOVATION AND LEARNING PERSPECTIVE Customer Satisfaction Index Work Environment Index Distribution Index High Score Index Weighting Index Distribution Index Gap analysis Organizational change assessment SOURCE: APPA, 2000. infrastructure capacity, and learning and growth objectives were to enhance in- formation management and close skills gaps (Kaplan and Norton, 2001). The Association of Higher Education Facilities Officers (APPA) developed a Strategic Assessment Model for facilities management that incorporates the four perspectives of the BSC and identifies quantitative performance indicators and qualitative criteria for evaluating the performance of a facilities management organization in each of the scorecard perspectives. The purpose of the Strategic Assessment Model is to help facilities professionals assess their organizations and carry out a continuous improvement program (APPA, 2000). The signifi- cance of the model is that many of the measures it incorporates relate to a facili- ties portfolio, not individual structures. Sample performance indicators used in the Strategic Assessment Model are shown in Table 4.1; other indicators may be more useful for other organizations. The measures developed to evaluate the performance of the organization, operating units, or individuals in meeting strategic objectives must be developed internally. Heerwagen (2002) provides a set of criteria that organizations of any kind can use in selecting appropriate and useful performance measures: Value. The measure addresses an important outcome or process and is related to the mission, goals, and objectives of the organization and oper- ating unit. Reliability. Repeated efforts to measure a phenomenon reach the same results. Validity. The measure is a good indicator of the outcome of interest (it measures what it purports to measure).

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68 INVESTMENTS IN FEDERAL FACILITIES Logical connection. The outcome of interest can be connected logically, or from existing research data, to the program. Ease of gathering data. The data should be obtainable with minimal extra cost or effort. Efficiency. The overall measurement plan uses the minimal set of mea- sures needed to do the job and enables conclusions to be drawn from the entire data set. Discriminating. The measures will allow small changes to be identified. The inclusion of both qualitative and quantitative measures is an essential aspect of an effective performance measurement system. Quantitative measures, such as operating costs per square foot of a facility, are often readily available and reproducible. Many people regard quantitative data as hard evidence and qualitative data as soft. This distinction is often interpreted to mean that quantita- tive data are better, when, in fact, they are just different. The operating environment within which performance measures are applied also impacts the types of measures developed and their utility. Private-sector or- ganizations typically have control over their processes, people, financial re- sources, and the allocation of resources to meet their internally established objec- tives. They can design their budgeting and accounting systems to support the types of data needed to evaluate performance in relation to organizational objec- tives and achievement of mission. Governmental organizations operate under the constraints discussed in Chapter 1. EVALUATIONS AND CONTINUOUS FEEDBACK Performance measures are of limited value unless they are used in conjunc- tion with formal and continuous feedback, or evaluation, processes. Evaluations have been defined as the systematic assessment of the operation and/or the out- comes of a program or policy, compared with a set of explicit or implicit stan- dards, as a means of contributing to the improvement of the program or policy (Weiss, 1998). Evaluations of people and processes can help determine if the organization's mission is being achieved and if strategic objectives are being met. They can also serve other purposes important to decision makers and managers: Midcourse corrections. Evaluations can be used to provide feedback early in program implementation to identify what is happening so that changes can be made before problems become serious and less amenable to cor- rection. Deciding whether to keep, abandon, or change a program. Evaluations provide data on what the program has accomplished to date and whether or not these accomplishments are in line with goals. If not, decisions can

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ENVIRONMENTS FOR EFFECTIVE DECISION MAKING 69 be made about program improvements to increase effectiveness, or a de- cision may be made to reduce or abandon the program altogether. Testing a new program idea. In many instances, new programs start as demonstration projects or experiments. Early evaluation can be used to identify which aspects of the program are succeeding and which aspects may need further development before the program is implemented at a larger scale. Choosing among alternatives. In cases where several different methods or programs are being tried out, evaluation can provide substantive feedback on which alternative is achieving the best combination of results overall (Weiss, 1998; Heerwagen, 2002). Continuous evaluation and feedback on processes and investments are essen- tial to controlling and improving them. Feedback can be positive or negative, take many forms, and be used over various timescales. It can be used to bridge the relatively static nature of facilities and the dynamic nature of facilities require- ments. Short-term feedback is widely used by organizations of all types to answer questions such as, Was the project completed within budget? Was it operational on schedule? Does it work? If not, why not? Techniques for receiving short-term feedback include real-time assessment, systems optimization, value engineering alternatives, construction realization, and postoccupancy evaluations. Because of the long-term nature of facilities themselves, longer-term feed- back also is needed to identify methods to reduce facility transaction and operat- ing costs and to improve decision criteria and processes. Did the facility invest- ment meet the organizational objectives? Did it correct an operational problem? Reduce long-term operating and maintenance costs? Contribute to a more flex- ible portfolio? Satisfy users? In best-practice organizations, the performance of projects, processes, people, business units, physical assets, investments, and the organization as a whole are continuously monitored and evaluated over both the short and long term using performance measures and a variety of feedback processes. An internal set of performance measures designed to capture good performance at levels that di- rectly or indirectly contribute to the desired objectives is developed. Specific elements of performance for individuals, operating units, and contractors can thereafter be tracked and evaluated, providing a strong accountability process in the short and longer term. FORMS OF FEEDBACK Project Management Weekly, monthly, and quarterly control reports for tracking the progress of a project during planning, design, and construction are standard operating proce-

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70 INVESTMENTS IN FEDERAL FACILITIES dure in most organizations. The performances of the project manager, operating units, and contractors are also monitored throughout the process. In some cases, the senior person responsible for the project may be required to meet with the board of directors to demonstrate that the project is proceeding according to plan. Adjustments in schedule and personnel may be made weekly or even daily as it becomes apparent that changes are needed. Once a facility project is completed, a more extensive evaluation is made of what worked well and where improvements in processes and project teams are needed for future projects. Internal Audits At the Public Service Company of New Mexico, feedback on major facility projects is provided by the project managers and by an internal operating group of auditors with a direct line to the board of directors. The innovative aspect of this approach is that the internal auditors function as internal management consultants rather than as a policing function. The auditing group is tasked with providing management efficiency studies as well as monitoring active projects. In some cases, other operating groups voluntarily call in the audit group to review pro- cesses and activities. The auditing group is staffed by a core group of individuals with accounting and auditing backgrounds, as well as operational backgrounds. Rotational assign- ments are available for people with operational backgrounds, allowing them to return to their operational function with an audit discipline and some on-the-job training in financial concepts and business skills. 360-Degree Review and Feedback The Johnson and Johnson Company reported using a process in which all of the participants in a specific project--in-house staff, the architectural and engi- neering firm, and the construction management firm--rate each other's perfor- mance. The project sponsor is also involved in rating the performance of the project. A formalized survey with a 1-5 rating scale for safety, quality, schedule, and other factors is used. All of the information is compiled in a lessons-learned database that can be used to improve processes and performance in subsequent projects. Peer Review Independent peer review is often used by owners and project managers of complex engineering projects as a means of quality assurance. It is a method of providing an outside, independent perspective--employing qualified profession- als with related experience--to identify issues that may have been missed and to reevaluate decisions to assure that the best alternative has been chosen (NRC,

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ENVIRONMENTS FOR EFFECTIVE DECISION MAKING 71 2003a). Peer review can also be used to introduce more innovation into a project and to overcome traditional impediments to improvement. Peer review processes typically result in changes in plans: Participants iden- tify better ways of operating as a result of listening to their peers. They can also be useful in bringing together private- and public-sector representatives to inter- act in a constructive way; in educating junior and mid-level people by exposing them to knowledgeable, more senior people; and in providing a forum for deriv- ing and discussing improved performance measures. Peer review efforts have been directed at the expensive and urgent chal- lenges of reconstruction at six airports: Buffalo, Boston, New York LaGuardia, Syracuse, Washington Dulles, and Washington National. The peer reviews fo- cused on idea generation and information exchange: Agendas were generated by a discussion among the peers, not presented ahead of time for review, amend- ment, and ratification. The main results were changes in plans as the airports found better ways of operating when they exchanged information. Cost savings also resulted but were not the primary objective in this instance. Postoccupancy Evaluation Postoccupancy evaluation (POE) is based on the idea that better living and work space can be designed by asking users how well the facility they are occu- pying satisfies their needs. POE is a process for systematically evaluating the performance of buildings after they have been built and occupied for some time. It focuses on the requirements of building occupants, including health, safety, security, functionality, efficiency, comfort, aesthetic quality, and satisfaction (FFC, 2001b). POE efforts in the United States and abroad have focused on government and other public buildings from the 1960s until today. Some private-sector organiza- tions in the United States began instituting POEs following publication of a 1985 report by Michael Brill et al., Using Office Design to Increase Productivity. A number of organizations have since used POE as a tool for improving, innovat- ing, or otherwise initiating strategic workspace changes (FFC, 2001b). Longer-Term Feedback The long-term nature of facilities investments, the longevity of facilities themselves, and the continuously changing operations of organizations require long-term as well as short-term evaluations and feedback. Does the facility in- vestment meet organizational objectives? Correct an operational problem? Re- duce long-term operating and maintenance costs? Contribute to change manage- ment? These and other questions can only be answered through long-term feedback, both continuous and periodic. Long-term feedback requires a cradle-to-grave monitoring and evaluation

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72 INVESTMENTS IN FEDERAL FACILITIES system supported by integrated databases and formal feed-forward mechanisms. Such systems, sometimes referred to as lessons-learned programs, are designed to collect, archive, and share information about successes and failures in pro- cesses, products, and other building-related areas for the purpose of improving the quality and life-cycle cost of future buildings (FFC, 2001b). The Disney Corporation provides one model from the private sector: It has been evaluating everything it does since the 1970s. Disney has at least three evalu- ation programs and three corresponding databases. One program evaluates the performance of materials and equipment, and the findings are recorded in a tech- nical database. A second program focuses on predictors of customers' intentions to return, Disney's key business driver. A third is aimed at refining programming guidelines and rules of thumb. The databases are not formally linked but are used extensively during design and renovation projects. By using these databases, the design and engineering team can improve future facilities based on past experi- ence and research. For example, streets can be designed to allow the optimal number of visitors to prevent overcrowding and stimulate gift shopping, key fac- tors in Disney's future success (FFC, 2001b). In best-practice organizations, once a facility is in operation, evaluation and feedback are employed to track operating costs and other factors over the longer term to determine if investment and organizational objectives are being met. They also measure and evaluate the performance of their entire portfolio of facilities in relation to organizational objectives. Such evaluations and feedback may often drive changes in the decision-making process itself. ACCOUNTABILITY Accountability has been defined as the relationship between those who con- trol or manage an entity and those who possess formal power over them. It re- quires the accountable party to provide an explanation or a satisfactory reason for his or her activities and the results of efforts to achieve the specified tasks or objectives. The process of accountability includes rendering an account of or explaining one's actions to those in authority or formal power so that they may assess performance, make a judgment, and take action (GASB, 1994). Private-sector organizations operate on a risk/reward basis, rewarding those individuals or operating units accountable for successful execution of an idea, project, or other activity and penalizing those accountable for less than successful efforts within their control. They link accountability, responsibility, and authority when making and implementing facility investment decisions. If an individual or operating group is to be held accountable for a decision to proceed or not to proceed with a facility investment, or for the execution of a project, that indi- vidual or operating group is given the appropriate level of authority and resources to meet their responsibilities. At the same time, they are held accountable for the results, whether positive or negative, and rewarded or punished accordingly.

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ENVIRONMENTS FOR EFFECTIVE DECISION MAKING 73 Typically, at higher levels of management the responsibilities and authorities of individuals increase and they become more accountable for the performance of their operating unit or the entire organization. In the case of a facility investment proposal, the reviewing body that decides to proceed or not to proceed may be held accountable for the results of that decision in relation to the achievement of operational or organizational objectives. Establishing accountability in the federal government, where decision-mak- ing authority and responsibility are spread throughout the executive and legisla- tive branches, is a complex proposition that is discussed more fully in Chapter 6. INCENTIVES In private-sector organizations, incentives are created to motivate in-house individuals and operating units to meet organizational objectives. The incentives are often, but not always, financial. For instance, for groups of individuals, bo- nuses may be linked to how their operating unit contributes to meeting organiza- tional objectives. Bonuses for senior executives may be tied to overall corporate performance, while bonuses for operations staff may be tied to project perfor- mance. Incentives are also created in less significant but important ways: through recognition and awarding additional vacation days, priority parking spaces, plaques and trophies, and the like. In one firm interviewed, every partner owns a percentage of all facility or real estate projects and thus has an incentive for monitoring the performance of the entire portfolio of projects. Quarterly reviews are held with investors. At regu- lar intervals, the oversight committee reviews the performance of individual projects. The intervals are shorter if performance or market conditions deterio- rate; if a project is in serious trouble, the monitoring is constant. In the public sector, creating incentives based on financial reward is a more difficult prospect and raises concerns about how such incentives can be appropri- ately designed. A wide range of nonfinancial incentives, including recognition, can also be used. These issues are more fully addressed in Chapter 6. PRINCIPLES AND POLICIES FROM BEST-PRACTICE ORGANIZATIONS Based on a consolidation of research, interviews, briefings, and the commit- tee members' individual and collective experience, the committee found that best- practice organizations that successfully manage facilities investments operate under a number of principles and policies when they make decisions (all 10 prin- ciples/policies are repeated in Chapter 6): Principle/Policy. Best-practice organizations establish a framework of procedures, required information, and valuation criteria that creates an

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74 INVESTMENTS IN FEDERAL FACILITIES effective decision-making environment and that provides a basis for measuring and improving the outcomes of facilities investments. The components of the framework are understood and used by all leadership and management levels.5 In best-practice organizations, effective decision making for facilities invest- ments is related to managing a free exchange of information among the various stakeholders, particularly those who might be skeptical about a proposed invest- ment. Open communications ensure that those who need to know and who can best critique a proposal have access at a sufficiently early stage to provide infor- mation and insights that can be constructively used to produce a better proposal. The more open the process, the more likely it is that errors in fact or methodology will be uncovered. Such organizations use additional framework components-- performance measures, feedback processes, accountability, and incentives--to measure, adjust, and improve decision-making processes, management practices, and the results or outcomes of decisions. Principle/Policy. Best-practice organizations use performance measures in conjunction with both periodic and continuous, long-term feedback to evaluate the results of facilities investments and to improve the deci- sion-making process itself. The notion of continuous process monitoring and feedback is built on the recognition that however effectively one plans, unforeseen events, unintended consequences, and change will occur. Best-practice organizations establish baselines and performance measures to monitor processes and the results, or out- comes, of those processes in relation to organizational objectives. Both quantita- tive and qualitative measures are used, and the measures are tailored to the organization's culture, mission, and objectives. Continuous feedback on processes and investments can be positive or nega- tive, can take many forms, and can be used over various timescales. Short-term feedback is widely used by organizations of all types. Not as widely used is longer-term feedback, which is useful in identifying methods to reduce facility transaction and operating costs and for improving decision criteria and processes. Principle/Policy. Best-practice organizations link accountability, re- sponsibility, and authority when making and implementing facilities in- vestment decisions. Private-sector organizations operate on a risk/reward basis, rewarding those individuals or operating units accountable for successful execution of an idea, project, or other activity, and penalizing those accountable for less than success- 5This principle/policy and that in the Executive Summary and at the end of Chapter 3 together form Principle/Policy 1 in Chapter 6.

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ENVIRONMENTS FOR EFFECTIVE DECISION MAKING 75 ful efforts within their control. If an individual or operating group is to be held accountable for a specific result, it is given the appropriate level of authority and resources to meet its responsibilities. Principle/Policy. Best-practice organizations motivate employees as in- dividuals and as groups to meet or exceed accepted levels of performance by establishing incentives that encourage effective decision making and reward extraordinary performance. In best-practice organizations, incentives are created to motivate individuals and operating units to meet organizational objectives. The incentives are prima- rily financial but also include recognition and other less significant but meaning- ful rewards for superior performance.