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I-28 most companies have diverged from this approach. They now most positive indicators for implementation of target-setting. set goals that they believe can be realistically attained within the For almost every agency reviewed that is using targets as part year. With realistic targets, the anticipated gains can be embed- of their PBRA process, political or legislative intervention ded in business unit or departmental budgets, and individuals provided the initial impetus for establishing discrete targets. can be more readily held accountable for their performance Political intervention can be triggered by a number of issues, towards reaching the target. On the other hand, complex, con- but the most common is the increasing limitation of trans- fusing, or overly aggressive targets can be used as excuses for portation funding at all levels of government, which has cre- non-performance. ated more competition for available funds and also made it The most common consequence of failure to meet targets more important to justify funding requests. is a less-than-favorable compensation review. This may or Depending on the nature of the political influence, elected may not be coordinated with a performance improvement officials or legislators may direct agencies to develop a more initiative at either the individual or the group or departmen- objective process that includes measures and targets, as was the tal level. Job loss also is a possible consequence of a failure to case in Minnesota, as a result of the Minnesota Legislature and hit targets. Department of Finance requirement that agencies use per- formance measures in biennial budget documents. It was also the case in Washington State, in which the State's Legislative 3.2 Factors Influencing Transportation Committee initiated a study in 1991 which Target-Setting resulted in recommendations for a PBRA process which is still Public Sector Experience in place, having been refined and improved over the last two decades. Political bodies may also establish targets themselves, There are multiple factors that lend themselves to the devel- as seen in California which legislated CO2 reduction targets opment of a PBRA process within transportation agencies. that the Metropolitan Transportation Commission (MTC) has These factors include such things as strong agency leadership been addressing as part of its recent regional transportation and crisis situations (e.g., funding shortages or public concerns) planning activities or in Atlanta where the Governor's Conges- that focus attention on agency decision-making processes, tion Mitigation Task Force resulted in a recommendation that and others. These factors have been well documented over the a travel time index target of 1.354 be adopted for the region. last two decades in performance-based literature. This section The latter situation, in which political bodies develop targets focuses on factors most important to target-setting as an themselves, can be difficult to negotiate, if the process is not element of performance-based planning. Target-setting is properly informed by knowledgeable transportation staff who a critical, yet often under-utilized aspect of PBRA. The factors will guide the development of reasonable, attainable targets. influencing target-setting, which emerged repeatedly from the While political involvement can be challenging, it also can pro- case studies developed as part of this study in Volume III, are vide transportation staff the support they need to select proj- summarized in the following section. ects that are proven to improve performance and therefore should be a priority for funding. This can often be a difficult Political/Legislative Influence situation for agency staff, working within any scale of govern- ment, that operate within a highly political arena where pres- Perhaps the most immediate and direct factor influencing sures to fund certain projects, regardless of merit (in relation target-setting as an element of PBRA is the existence of a to stated transportation goals), can be intense. commission or other political body to which a transportation agency must report the performance of investment decisions. Political intervention in the process may result from contro- Customer Service Focus versy, as seen in states such as Florida, Virginia, and Ohio that Those agencies that have taken a clear customer-service have said candidly that legislative criticism over project deliv- approach to transportation planning, management, and design ery and fiscal forecasting compelled expansion of performance understand the need to use targets to be able to communicate targets and accountability, or the increasing public outcry over to the system user--the "customer." Customer satisfaction is a transportation services that force political attention on an fundamental aspect of performance for these organizations. issue, as is the case in Atlanta, GA, where increasing congestion issues led the Governor to establish a congestion task force 4The Travel Time Index (TTI) is the ratio of travel time in the peak period to travel which ultimately recommended a congestion reduction target time in free flow conditions (speed limit). For example, a TTI of 1.35 indicates a trip that takes 20 minutes in free flow conditions would take 27 minutes in the peak for the region. (35 percent longer). The TTI can be used as a performance measure to track While political influence of this direct manner can have changes in the regional transportation network and to regularly report to the pub- very complicated repercussions, it has shown to be one of the lic progress being made in improvement of the operation of the network.

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I-29 They break down and analyze customer satisfaction or dissat- are communicated in terms that decision-makers and the isfaction from broad perspectives that address issues in areas public understand, they become useful tools. Keeping it such as social and community impacts and environmental simple can be viewed from the following perspectives: impacts of transportation investments, and in more narrow Keep the measures and the targets simple. Do not make terms that address issues related to daily personal travel needs. performance measurement an academic exercise; meas- Coral Springs, Florida, provides a very strong example of a ure what is important, do not measure everything. Too municipality that has taken a very direct customer-service many measures and targets, with their own data systems approach towards its resource investment process, in which and evaluation procedures, can create a cumbersome customer input drives the decision-making process. Target- and unsustainable situation in which an agency is data setting is a key component of the Coral Springs process as it rich but information poor. provides a direct translation of progress, as feedback for a Communicate performance in terms that are readily community that has been actively engaged and empowered as understood. Communicating targets in a manner that part of the planning process. makes sense to the general public seems to be a strong The Coral Springs focus on customer satisfaction is per- indicator for the success of PBRA and the integration haps the most important factor influencing target-setting, of target-setting. which can be seen most clearly in the private sector examples. This principle is exemplified by a number of agencies, As indicated in the ABC Logistics case study, customer service including ARDEC, which tracks performance in 16 dif- is the overriding objective in its resource allocation process, ferent areas on stoplight charts with red, yellow, and and its entire process is geared towards customer satisfaction. green indicators; the City of Coral Springs, FL, which ABC Logistics exhibits all five elements of PBRA, including "rolls up" an extensive series of performance measures target-setting. Each defined goal has a target, with targets into 10 key composite measures, referred to as the city's stemming from the promises made to its customers in their Stock Index, that summarize city performance at a glance; contracts with the logistics company. A Customer Care pro- and Hennepin County, MN, which uses a Balanced gram monitors the company's performance relative to the tar- Scorecard approach in which numerous measures are gets and customer expectations, with a feedback mechanism evaluated and tracked in terms of multiple perspec- to communicate results to the public and to link individual tives (customer, finance, internal process, learning and employee performance (and merit) to the performance of growth) and simplified into tables of information provid- the company. Additional factors influencing target-setting in ing "warning lights" for areas in need of improvement. the private sector are described in the following section on The "keep it simple" principle is particularly strong in the "Private Sector Experience." private sector. Integrate performance measurement into daily agency prac- tice. This directs attention to key issues, promotes financial PBRA History/Evolution in State of the Practice resources, and provides the ability to develop stronger PBRA Another key factor in target-setting is an agency's perfor- systems. Some of the agencies reviewed have tied perform- mance management history. Agencies that are only at the ance of investments to staff-level performance, though it is beginning of implementing a performance-based process gen- more common among the private sector cases. The agencies erally have less complete and less sophisticated target-setting have shown the importance of making sure that each staff processes. In general, there is a typical evolutionary path that person understands his/her contribution to the mission, and agencies follow. A corollary to this evolution is the emergence that the level of contribution should be part of the staff review of an agency's data sophistication. process. They have learned to "manage by the measures." Agencies with a history of PBRA, including target-setting, Start now. Agencies with mature PBRA systems indicate provided the following insight into how best to incorporate that the only way to have a "PBRA History" and begin the target-setting into the PBRA process: evolutionary process is to get started with PBRA and target- setting and learn by doing. "Keep it simple!" Agencies that have a history with performance-based planning and application of targets in Mn/DOT's measures and targets, identified in its 2003 the resource allocation process understand the need to Statewide Long-Range Plan, were refined through applica- keep the target-setting aspect relatively simple and easy tion. As a consequence, the following PBRA-related changes to understand. When adding the target-setting dimension were made in the new 2009 long-range plan: to the PBRA process, it could easily become a much more difficult system to manage. However, if measures and their Expanded safety measures by stratifying different modal attendant targets are kept focused and straightforward and and vehicle type of fatalities;

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I-30 Eliminated most of the land use measures; public on the toll system. The report, as well as weekly data for Added access to intercity bus service, air service, and airports; each plaza, also can be used to determine when and where to Added transit ridership; add staff at toll stations in order to keep traffic moving safely Added Congestion in Regional Trade Centers, Public Tran- through the expressway system. Other resource allocation sit Service Hours, Transit Coverage, and nonauto commuter decisions resulting from these data include budget adjust- trips; and ments and capital project prioritization and scheduling. Added air pollutants, cleaner fuel, and wetland impacts. Japan's Ministry of Land, Infrastructure, and Transport (MLIT) management framework incorporates four key steps, MTC's performance-based process also has been evolu- the third of which is to "evaluate achievement levels." Through tionary during the development of its last three long-range this process, the Road Bureau uses performance measures to plans. Numerous advances in introducing a performance- prioritize roadway projects within program areas based on based framework were made even within the last year of reported results and progress towards annual and 5-year targets developing the most recent RTP and have contributed to the (Figure 3.3). The Bureau submits a required report, which com- development of more meaningful targets for that agency. pares performance to funding, to the Ministry of Finance when Washington State DOT's (WSDOT's) experience also con- the MLIT requests funding, though funding to the Bureau is not firms that target-setting requires a solid history of performance tied to the reported performance. For the MLIT, as with the data as well as managerial comprehension and appreciation of OOCEA, these reporting mechanisms with progress towards that data, which comes with time and experience. Managers targets aid in interfacing with the public and stakeholders and must have the ability to understand transportation system also guide internal decision-making. If MLIT targets are not behavior--i.e., "what the data are saying"--and to discern what met for a program, for instance, then a closer review is done they can or cannot control. to determine how the processes for that program may need to be revised, or if a new program may need to be developed to address those performance needs. Conversely, if targets are Commitment to Regular Communication consistently met earlier than anticipated, target deadlines or and Reporting measures are reset to reflect more accurate expectations. Regular tracking of investment performance and report- Each year since 1994 Hennepin County has produced a ing of results to the public and transportation stakeholders Community Indicators report that provides a view of the cur- serves to focus attention on an issue over time so that it is rent community conditions and trends based on selected quan- not lost in political and public discourse as new challenges titative data. The report is a reflection of the health of the arise. Regular reporting and communication of progress county as a whole. Over time, indicators have been adjusted and helps to keep staff and the public focused on the particular updated to reflect the county's changing interests and priorities. challenge, especially when it is tied to agency or even staff- However, many of the original indicators have been retained in level "merit"/compensation. This helps all involved to under- order to establish a trend line and track changes in residents' stand the nature of solving process problems over the long quality of life. In 2002, Hennepin County government intro- term, rather than focusing on immediate issues (e.g., fight- duced a strategic management framework that focuses on ing fires) that often distract from the larger mission of an results and customers. Consistent with the framework, the indi- agency. It also supports longer term trend development that cators in each annual report have been grouped to align with the is needed to track the performance of investments over time. county's current overarching goals. The regular development of Regular reporting of performance results is a commitment these "products" that are distributed to the public and used by common to all organizations interviewed. This occurs both decision-makers helps to maintain staff enthusiasm for the internally and externally for public sector organizations, and performance-based process and ensures the continued devel- usually just internally for private sector organizations. The fol- opment of the necessary inputs for the report. lowing examples illustrate how some agencies support the democratization (i.e., widespread access) of data within the Span of Control/Agency Jurisdiction agency, as previously discussed in Results Monitoring. For example, the Orlando/Orange County Expressway Authority Traditionally, transportation performance measures have (OOCEA) publishes a monthly report entitled "Expressway been used to gauge the impacts of discrete types of investment Travel Time Performance" which documents the morning strategies in relation to very specific transportation goals, and evening peak travel times per lane on the designated roads with goals most often tied to a modal aspect of the transporta- which are under the operation of OOCEA. This report is crit- tion system, fund source for the transportation investment, ical to the OOCEA as a "performance management" tool to or particular transportation function within a particular assess the effectiveness of managing the travel time for the geography (local, regional, state). This has led to a somewhat

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I-31 Source: Road Bureau, MLIT, "Outcome-Based Road Administration Management in Japan." Figure 3.3. Road bureau performance measure and target report for FY 2006 and 2007. siloed approach towards performance measurement, with controls the perspective from which each investment is evalu- measures that provide a more narrow assessment of investment ated. An agency that manages only highways will have a nar- options as opposed to a "systems"-level perspective. While rower set of measures than does an agency with jurisdiction for many transportation organizations have begun to develop more multiple modes. States responsible for all roads, rather than comprehensive performance measures that better reflect their only the higher functional classes, face greater data-gathering diverse planning goals and objectives, measuring perfor- complexities. This can influence how they set targets and how mance over the larger transportation network and across var- they use data to measure progress towards those targets. For ious stages of the transportation planning process remains a instance, Mn/DOT has direct control over the quality of pave- challenging endeavor. This topic is being evaluated through ment, but it can only influence transit service provided in NCHRP Project 8-67. Greater Minnesota through funding. In all instances, the level The span of agency control, whether it is through funding, of influence that the department has over a particular measure modal authority, or geographic jurisdiction, plays a strong affects the target that is eventually set. Within DOTs, stan- role in the development of measures and targets, because it dard siloing of functions has led to strong asset management

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I-32 systems for roadway maintenance functions, but this process and the national government's 5-year Major Infrastructure has not translated as strongly to other DOT functions. Development Plan. Longer-term targets (referred to by The emerging authorization debate includes the possibility the Road Bureau as "goals") match this with a 5-year span. of Federal performance measures and targets. Targets must be The Road Bureau utilizes the funding reports to estimate highly sensitive to the differences among states in terms of their future funds, assuming that approximately the same amount data, analysis methodologies, existing funding, PBRA history, of money will be available annually for the next five years. and other constraints. This likely will result in very high-level, This information is used when determining feasible 5-year broad targets. Targets likely need to be tied to incentives or dis- goals for the Bureau and results in what is essentially a finan- incentives due to limitations in the Federal government's span cially constrained target. of control over the systems being measured. In the case of the The Road Bureau sets and annually updates shorter term Kansas State Department of Education (KSDE), Federal No- annual targets when it prepares its annual Performance Mea- Child Left Behind legislation presented Federal targets for the sures Report/Planning Report. At this time, the measures State to achieve, changing the KSDE's role and to some extent themselves also are reviewed and subsequently modified or changing its span of control within Kansas' educational system. new measures are added. This adjustment in the measures The KSDE ties its own state-level targets, which complement themselves may then require an adjustment in the relation- the national targets, to accreditation and limited incentives. ship between the targets and the measures. Targets for the next fiscal year are based on the possibility of achievement and similar to the 5-year goals, consider financial constraints. Financial Resources In Washington, the primary responsibility for translating No constraint or factor in constraining the PBRA process and long-term goals (dictated by elected officials) to short-term affecting target-setting is cited as much as financial resources. or "incremental" goals, objectives, and targets falls to the Financial resources are intimately intertwined with the resource Department of Transportation, in consultation with execu- allocation process, both determining an agency's ability to tive and legislative members and staffs. This process centers implement such a process by influencing other factors such as on how to set and describe these incremental milestones, technical resources, and also potentially being determined by how to communicate them to the public, and what legal lia- the process itself. bility the State may incur by promoting these short-term For example, performance data has played a key role in targets publicly. WSDOT managers also may consider alter- biennial state legislative budget allocations for Mn/DOT, and natives and adjustments in the engineering solutions to it also has played an important role in the debate for new problems, in the methods of service delivery, and in the con- transportation funding. Mn/DOT quantified its highway per- struction materials and techniques to be used in order to formance measures and targets in its 2003 State Transporta- address these short-term targets. These options help to tion Plan and concluded that Minnesota was under-investing achieve stated targets within current funding and other in its highway program by one billion dollars per year. This resource constraints and thus maintain consistency between performance-based analysis was accepted by the legislature short-term program accomplishments and long-term, aspi- and virtually ended the legislative debate on level of need. The rational goals. legislative discussion shifted from the question of need to the question of payment. Technical Resources Similar to the influence of financial resources on target- setting, staffing and person-hours of available time can affect The presence or lack of forecasting tools can influence greatly the depth of a PBRA program, including targets that an agency the sophistication of forecasted targets. Agencies that have used can assemble and monitor. HERS, PONTIS, and other tools for forecasting the results of long-term programs have greater insight with which to set long- term targets. Timeframe Availability of analysis tools to identify performance impacts The timeframe of desired results affects how targets will be of projects realistically and efficiently and to track performance set and what they will be. Timeframe is sometimes deter- in relation to targets will determine what measures and targets mined by stakeholder and internal agency needs but also can can be used. Sometimes agencies develop desired measures and be dictated by forecasting capabilities. targets, even when data are not yet available, as a means of At Japan's MLIT, annual targets are derived in part from creating a "wish list" of data sources. Often it is difficult for the latest major subjects of policy, planning, and program- decision-makers to see the need for data collection for a single ming to emerge from the funding reports from the MLIT and performance metric, particularly if it appears to be part of a sin- Road Bureau, the Road Bureau's Mid-term Visioning Report, gle endeavor (e.g., a long-range plan); if it is part of a larger,

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I-33 comprehensive PBRA process, however, it is often easier to central office. Decentralization means that FDOT's district justify additional data needs. offices are essentially DOTs themselves, each with its own The evolution of tools over time makes it very difficult to secretary, with planning, environment, right-of-way, design, track progress consistently. Change over time in tools, data, construction, maintenance, and legal offices. The various and analysis procedures, as well as differences between agen- offices within the districts report to the district secretary and cies and jurisdictions, can make it difficult for stakeholders-- not to their counterparts in the central office. The district sec- and even internal staff--to properly interpret the results. Staff retaries report to the Secretary, and also sit on the FDOT turnover also can exacerbate this situation. Agencies must Executive Board. Detailed funding allocation decisions are develop ways of maintaining their institutional knowledge made at the district level, resulting in wide variations in fund- base to properly utilize evolving tools and procedures. ing priorities and decision-making processes among different It is often difficult to make the case to senior management districts. This structure requires a strong but flexible per- or political decision-makers for funding for data and tools. For formance management system to ensure consistency across the MTC, the development and availability of the StreetSaver districts in terms of achieving statewide goals. FDOT's over- pavement management tool has greatly aided that MPO with all Business Plan seeks to maintain accountability and trans- project prioritization and funding distribution among local parency for processes that may not be standardized across the jurisdictions and has garnered strong buy-in among those department. communities. It has made this particular asset management program arguably the most data-driven, performance-based Stakeholder Expectations process in the MPO's planning process and has allowed for more rational maintenance of the region's highways. Stakeholder influence can have a very significant impact on However, the MTC's existing analysis and modeling tools target-setting. When external stakeholders become engaged in are not equipped for a rigorous performance analysis at the the process, they can influence which measures are focused project level for long-range planning, with precision levels upon. These stakeholders range from the public and elected lower than desired. It also is difficult to compare performance officials to contractors, the construction industry, state and between modes, or even measuring impacts within non-auto Federal resource agencies, and public safety agencies, among modes, such as capturing benefits from bike networks or others. transit programs. The majority of agencies reviewed with established targets Typical technical resources available to organizations as developed them through a committee process that provided well as the influence of these resources on target-setting are for stakeholder input. As such, it provided an opportunity for elaborated further in Section 3.3. dialogue about the transportation issues, constraints in fund- ing, and other topics, and as such led to the development of realistic, meaningful targets. This is absolutely critical for state Centralized/Decentralized Organization DOTs and MPOs who make decisions in a very litigious envi- The organizational structure of an agency affects the struc- ronment. It is critical to communicate, not only the lofty, long- ture of that agency's PBRA program and process as well as the term goals for transportation systems, but the reality of fiscal development and purpose of targets. WSDOT is a somewhat and political and regulatory constraints so that stakeholder centralized organization, allowing the central office to work expectations can be managed from the beginning. Without directly with state government and stakeholders to establish this, public transportation agencies would be wary of setting targets. It also allows the organization to handle a somewhat their agencies up for disaster and perhaps even encountering complex and involved target-setting process for capital legal trouble. Transportation is a long-term business, with per- programming, which must account for broad policy goals formance typically improved over the long term, but agencies and objectives, external reporting, and internal programming operate in the context of short-term politics, which has a very needs. The target-setting process is coordinated across several strong impact on performance-based management. It is often other processes, such as WSDOT's long-range planning process challenging to develop and sustain consistent measurement (LRP), its biennial Strategic Plan, the Governor's GMAP, the practices and target-setting to enable meaningful tracking of Attainment Report submitted by OFM to the legislature, the performance over time. Federal Stewardship Report, and the Washington State Qual- For example, for the MTC, several different levels of ity Award (a Baldrige process). stakeholder participation constitute the long-range planning Conversely, the Florida Department of Transportation process. Overarching goals and strategies were set at the exec- (FDOT) is highly decentralized, resulting in possibly differ- utive level. A subcommittee of the MTC Planning Commit- ent targets for different measures in different districts, but tee, an ad-hoc committee consisting of the nine counties and with broader and more flexible measures and targets at the 26 agencies in the region, derived the measures and targets.

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I-34 The MTC Planning Committee voted on and approved mea- Five environmental variables shape the performance man- sures and targets. The Commission had the final word in agement and resource allocation process and consequently approving the targets. Keeping flexibility in the target-setting the target-setting process in private sector companies' trans- process, and using language such as "voluntary" and "interim," portation organizations. Organizational structure, owner- was critical in getting the Commission to approve targets and ship, history, culture, and planning capabilities can combine properly set stakeholder expectations. This approach also was to form different approaches to performance measurement considered prudent from a legal perspective. and management, as described in the following paragraphs: Organizational Structure. Companies with multiple busi- Internal Support ness units often hold up the highest-performing business A common theme among many agencies with more devel- unit as the benchmark that the others should strive to beat. oped PBRA processes is internal support and an inside "cham- Companies that are capital-intensive tend to have more pion" at a high level. While the MTC's PBRA process in regards sophisticated capital expense authorization processes. The to long-range planning has evolved over the development of element of competition is often more important than the the last three plans, the Executive Director championed PBRA specific targets, so some companies let their divisions with staff and elected officials for the development of the have a broad role in determining which metrics to use. MTC's most recent plan. The development of the plan started Form of Ownership (Private Versus Publicly Traded). with the development of performance objectives and the Privately held companies are willing to say which metrics setting of very aggressive performance targets. they track, but are reluctant to divulge their targets since The performance-based system in Hennepin County is that might give away competitively valuable information. championed by the County Administrator as well as the Pub- In publicly held companies (traded on stock exchanges), lic Works Director. The setting of performance targets at financial goals inevitably drive the operational goals. In Hennepin County is driven by the top-level managers; as a contrast, privately held companies often emphasize oper- result, these managers understand the importance of acquir- ational excellence before financial success in the belief that ing relevant data. the former will lead to the latter. While these initiatives often begin with strong internal sup- History. Companies that have a long history with a specific port and an inside "champion," ultimately processes or proce- performance metric work comfortably with targets based dures must be put in place that can transcend administrations on that metric since the organization understands the past, or individual staff. present, and future using that metric as a reference point. Culture. In companies with a competitive spirit, the atti- tude about the numbers is more important than the num- Private Sector Experience bers themselves. In companies with an analytical culture, The different mission and vision that private sector com- data collection and analysis is revered and viewed as syner- panies have from their public sector counterparts results in gistic with continuous improvement. different priorities and targets. As private companies exist Planning and Forecasting Capability. Companies with to satisfy their shareholders, the primary driver of share- strong forecasting capabilities are more apt to have long-term holder satisfaction is typically corporate profits. Therefore, goals and targets, whereas companies with weaker forecast- they typically place little emphasis on public outreach, and ing capabilities are more inclined to set annual targets only. they try to avoid or minimize the effect of regulatory burden (versus adhering to and even enforcing regulations, which a Private sector companies take a different approach to DOT must do) in order to streamline operations and mini- PBRA based on the different nature of the resources that they mize cost. manage. Staff, capital assets, and budgets may have different In contrast, transportation agencies heavily weight public targets as well as different target-setting approaches due to policy issues such as social equity, access to urban areas, and their different composition compared to their public sector urban planning when formulating their policies, whereas few counterparts, as described in the following paragraphs: private sector companies take into account public policy con- siderations when deciding how to allocate their resources or Staff. Most private sector companies employ a mix of full- measure their performance. Those companies that factor in time, part-time, and temporary employees, so attrition and public policy to their resource allocation process tend to be in turnover rates are higher, which makes it easier to imple- highly regulated and/or capital-intensive industries where ment the Darwinian principle of "survival of the fittest" public affairs is important to the success of the business, such to allocate staff resources. A bell curve is often used for as rail transportation. grading performance, and as individuals outperform their