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OCR for page 91
Guide for Target-Setting II-21 Table 1.3. Managing risk of target-setting approaches. Target-Setting Approach to Balancing Approach Advantage Risk Advantages with Risks Edict Less time and money Lack of defensibility Use hybrid approach. intensive. and inclusion. Unequivocal and well-understood. Expert Opinion Insures broad May flounder in effort Appoint internal champion to understanding and to be inclusive. lead effort to identify the acceptance within and "critical few" measures and outside agency. targets. Customer Feedback Insures more May be confusing to Describe measures and transparent process. discuss technical targets in the simplest terms measures with public. possible. Benchmarking Provides a peer group Can be misused for Continue to refine comparison. comparative rankings. comparative analysis techniques. Modeling Defensibility. More time and money Continue to refine modeling intensive. techniques. Better understanding of future Models change over Use hybrid approach. performance. time. Step 4--Establish Methods for Achieving Targets Public and private organizations use several specific methods geared towards helping an agency achieve established targets. Most critical to this, in broad terms, is the integration of per- formance measurement into daily agency practice. This directs attention to key issues, promotes financial resources for PBRA, and provides the ability to develop stronger PBRA systems. Incentives The MTC allocates funding to jurisdictions based partly on progress towards roadway main- tenance targets, which are set through a modeling approach. The MTC examines each jurisdic- tion within the MPO to see how much of their budget is allocated to preventative maintenance projects and compares that to their unique target ratio of preventive to total maintenance as determined by the StreetSaver PMS tool. Jurisdictions with good pavement conditions will have a higher preventive maintenance target than those with poor streets since the aim of preventive maintenance is to keep the good streets good, thereby reducing long-term costs. Their ratio of "actual versus targeted" determines the jurisdiction's performance score and is a factor in calcu- lating the amount of funding that will be allocated to that jurisdiction. The allocation of regional funds conditioned on preventive maintenance is 25 percent. In the case of the Kansas State Department of Education (KSDE), Federal No-Child Left Behind legislation presented Federal targets for the state to achieve. The KSDE ties its own state- level targets, which complement the national targets, to accreditation and limited incentives. Internal employee incentives and sanctions are discussed in the following section on Person- nel Performance Appraisal. Personnel Performance Appraisal It is important to ensure that each staff person in an organization understands his/her contri- bution to the mission and that the level of contribution should be part of the staff review process. These organizations have learned to "manage by the measures."

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II-22 Guide for Target-Setting and Data Management Salary and incentive bonuses, powerful motivators, result in targets that are driven by what people can achieve rather than calculated guesses. Also, compensation that varies depending on performance versus the target is widely viewed as an effective way of motivating perfor- mance. Agencies also can use nonmonetary recognitions, even elaborate ones, in order to achieve a similarly high motivational level. MDOT SHA (Maryland Department of Transportation State Highway Administration) is leading a pilot on behalf of MDOT to base managers' performance appraisals on performance plans that link to office/district business plans as well as individual performance targets. SHA has completely changed its assessment forms to incorporate performance management in these per- sonnel reviews. The assessment now consists of two parts: Leadership competencies (40 percent) and an annually updated Performance Plan (60 percent). Performance is now linked to person- nel reviews for staff down to the midmanagement level. For these staff members, the focus is on output measures as opposed to outcome (longer-term strategic) measures. In the private sector, ABC Logistics uses a Darwinian performance evaluation system that favors high performers and weeds out underperformers through the judgmental application of raises (or the reverse), bonuses, and promotions. Quality Control and Support Through continuous tracking of performance and progress towards targets, agencies can iden- tify when problems occur and deal with the shortcomings in a timely manner. Some organiza- tions, especially those with a strong culture of performance management well integrated into most processes, have teams dedicated to performance management and even specific leads for individ- ual goal areas or measures; these groups and individuals can identify shortfalls in progress, work to identify why the shortfalls are occurring, and provide additional support or make other changes as necessary. If Maryland Transportation Authority (MDTA) performance is below target (i.e., employee retention and invoice processing time), the Performance Management Team assigns a quality improvement team to work with the division and improve the process and increase performance. At DIY Company, failure to achieve a target results in the invocation of a performance improvement plan. Tradeoff Analysis The concept of "tradeoffs" summarizes the main challenge facing transportation agencies--there are more needs then resources available to address them. In this environment, agencies must con- tinually make difficult decisions on which areas of the transportation network to focus their limited resources. Transportation is often a zero-sum game, so additional investment in one area means that an agency must invest less in another. For example, what would be the impact on pavement per- formance if pavement funds are increased by 10 percent over the next 10 years? What would be the impact on bridge performance if this money was shifted from the bridge program? In the context of the overall performance management framework, this type of analysis can help agencies establish relative priorities, set targets, allocate resources, and better manage stakeholder expectations. Tradeoff analysis currently is limited in public sector transportation agencies. However, Sec- tion 3.4 of Volume I provides an in-depth discussion of the role of economic models and man- agement systems in target-setting and tradeoff analysis.

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Guide for Target-Setting II-23 Competition Intracompany team competition also is an effective way to motivate performance and estab- lish the right targets based on what can be achieved through competition rather than on a calcu- lated target. Seeing a business unit compete and succeed can stimulate an aggressive response from a competitive peer. Baldrige winners use internal competition extensively to instill creativ- ity and better results. Availability of Data Wide and easy access to targets and performance data helps stimulate better knowledge of current performance and performance gaps, hence the ability to improve performance and to do it more rapidly. In contrast, complexity and waffling will dampen attempts to improve performance. Numerous private-sector Baldrige winners plus several Balanced Scorecard users rely heavily on the wide dissemination of performance data inside their companies. Corporation X posts its performance metrics to an intranet where the operating results are available to all users. Table 1.4 summarizes the advantages and risks of each target-setting approach. Table 1.4. Methods for achieving targets. Method for Achieving Approach to Balancing Target Advantage Risk Advantages with Risks Incentives Strong motivator. Inequalities. Nonmonetary rewards. Could sacrifice performance on Use incentives rather than one parameter in trying to sanctions. maximize another. Incentives or sanctions at program or division level may not fit with public-sector priorities. Personnel Performance Strong motivator. Inequalities. Team or group bonuses. Appraisal Results in a "natural" target. Could sacrifice performance on Nonmonetary rewards. one parameter in trying to maximize another. Quality Control and Avoids disincentives for not By itself provides less direct Combine with other methods. Support meeting targets. incentive for achieving targets. Tradeoff Analysis Optimizes resources for Requires more data and Build capabilities over time. reaching targets modeling sophistication. Stakeholder/customer understanding of resource constraints. Competition Results in a "natural" target Could sacrifice performance on Stimulate internal competition Stimulates sharing of best one parameter in trying to based on a balanced scorecard practices. maximize another. of metrics. Availability of Data Facilitates more improvement Education and interaction with Apply varying levels of access ideas. peripheral users of the data permissions. could derail progress. Technology to disseminate the Use web-based gathering and information could be costly. filtering of input.