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This chapter discusses the basic structure of performance management, the role of perfor- mance management in overall agency management, and how transportation agencies use per- formance management to address the many challenges that they face. Figure 2.1 summarizes the basic relationship between performance management and two other key processes that are not the primary focus of this Guidebookâstrategic planning and reporting. Though not necessarily organized within a transportation agency in this fashion, the implementation of these three broad concepts within the management of a transportation agency is necessary to ensure the implementation of performance management. Together, the three components establish the foundation for a continuous cycle of identifying priorities, allo- cating resources, refining agency practices, managing staff, and maintaining accountability to the public. Though each process has its own timeframe and cycle, there are important links between performance management and strategic planning and between performance manage- ment and reporting that are discussed throughout this Guidebook. However a transportation agency chooses to organize itself, the links described in this section were common to the case studies conducted as part of this research effort. Strategic planning at a DOT is generally driven by three interests (shown on the left side of Figure 2.1): 1. The agencyâs customers and their needs; 2. Engineering and other DOT programmatic requirements; and 3. The principles of fiscal responsibility and efficiency. Performance management provides support for the strategic planning process by helping transportation agencies make decisions based on meaningful data that touches upon all three of these interest areas. Tracking and reporting performance data helps agency executives to under- stand the impacts of investment decisions and agency practices on the state of the transportation system and the systemâs impact on other social, natural, and economic systems. It also provides the key inputs that can and should be used to establish priorities during subsequent strategic planning phases and to measure progress on previous strategic goals. The following three sections briefly describe the subordinate components of each of the three processes shown in Figure 2.1, how the processes relate to one another, and the role of perfor- mance measures in each. Finally, Section 2.3 introduces the âInsightsâ that are presented in the subsequent four chapters of the Guidebook. 13 C H A P T E R 2 Performance Management Structure
2.0 Strategic Planning Strategic planning is the venue through which a DOT articulates its vision for both leadership and employees for the future, identifies challenges, prioritizes goals, and sets achievable short- term objectives for meeting them. This process does not need to be over involved and complex but is an important means to focus the agency on its key challenges and opportunities. Performance management practice suggests that performance measures and decisions should be connected to an agencyâs strategic planning process, which typically includes four basic com- ponents of development: vision/mission; goals; objectives; and initiatives and implementation strategies (Figure 2.2). Measures can play a central role in developing this framework through at least three specific contributions: 1. Illustrating past performance, 2. Establishing the framework by which outcomes are gauged, and 3. Tracking progress towards goals. Most agencies already have a strategic planning process in place that may contain some or all of the components described in this section. Whether or not the process already is performance- based, it should be dynamic, ongoing, and responsive to new challenges or shifts in agency pol- icy. Therefore, it is never too late to integrate a performance-based approach into strategic planning. The uses of performance management that are described in this section can be applied 14 Transportation Performance Management: Insight from Practitioners Strategic Planning Process Customer Engineering Fiscal Performance Management System Reporting (Internal and External) Figure 2.1. Key DOT management processes. Figure 2.2. Strategic planning structure. Customer Engineering Fiscal Strategic Planning Process Performance Management System Reporting (Internal and External) Initiatives Vision/Mission Goals Objectives
to an existing and ongoing strategic planning framework at any time. Improvements can be real- ized incrementally, and it is unnecessary to revise the process from the ground up. 2.0.1 Developing a Vision or Mission An agencyâs mission or vision is the set of foundational principles that guide all of its policies and business decisions. A mission should be broad enough to encompass the agencyâs entire breadth of responsibilities, while specific enough to suggest actionable goals and objectives. As discussed in Section 3.0, the best strategic plans directly target the particular challenges that an agency faces, such as a funding crisis or a track record of unreliable project delivery. In some ways, the process by which a vision is developed can be as important, or even more important, than the vision statement itself, because of the conversations and critical questions that precede and inform it. Performance measures, including qualitative measures from instruments such as customer sur- veys, can provide critical input for agency executives seeking to identify where improvements are most needed and where the agency might be neglecting its responsibilities or falling short of expectations. For example, many DOTs until recently failed to recognize their constituents as âcustomers,â a failure likely to manifest itself in user surveys revealing a lack of faith or trust in the agency. An appropriate first response to this particular challenge would be revising the mis- sion statement to reflect âa focus on customer serviceâ or similar sentiment. 2.0.2 Developing Goals While an agencyâs mission can remain the same for a long period of time (although it does not have to), its goals can and should change as necessary in response to new or evolving challenges. Performance measures should directly inform the development of goals by highlighting trou- bling trends and particular agency challenges. Goals should address a variety of facets of the agencyâs performance, including external performance (state of the system, project delivery, cus- tomer satisfaction, etc.) and internal performance (human resources, communication, employee satisfaction, etc.). 2.0.3 Developing Objectives One of the characteristics of an effective strategic plan is that it contains a limited number of achievable, measurable, objectives to be realized within a few years. Developing objectives is the step in the strategic planning process where specific desired outcomes are defined and some- times quantified. Strategic objectives will ultimately determine the measures that are used to gauge success. Thus, it is important to set objectives that can be measured. An example of a specific, achievable, and measurable strategic objective comes from Missouri, where in 2004 the DOT set a target of reducing highway fatalities to below 1,000 in 2008. The specific focus on fatalities reflected an agency priority that came out of a collaborative strategic planning process and represented a shift from the more traditional focus on crashes per vehicle- miles of travel (VMT). For more examples of how an agency can use strategic planning and per- formance management to hone in on key agency goals, see Chapter 1. 2.0.4 Developing Initiatives and Implementation Strategies Strategic initiatives and implementation strategies are used to help orient the agency towards achieving desired outcomes and fostering informed and responsive decision-making. This is the step where agency goals and objectives are linked most closely with performance-based decision- making and resource allocation. Goals are in place, specific measurable objectives have been set, Performance Management Structure 15
and in this final strategic planning step the agency establishes a set of regularly updated policies and procedures that build on one another and are oriented towards improving system performance. One key concern in developing a strategic plan is that it must âhave teeth.â If no one follows it, a strategic plan is worse than useless: the time spent creating it could have been spent on some- thing else. Thus one key area to be addressed in the strategic implementation stage is establish- ing accountability for the goals and objectives. This can be accomplished by linking each objective, target, and/or measure to a specific manager within the agency (or within each dis- trict) and establishing a regular measure review schedule. Other initiatives to drive accountabil- ity include the development of dashboards, holding regular agencywide performance review meetings, and other public releases of performance data. Initiatives should define key leading indicators that will help an agency know if they are mak- ing progress towards meeting their stated objectives (the actual results will eventually be cap- tured by lagging indicators). For example, several state DOTs have developed predictive models for their pavement programs and can use these models to track incremental investment in areas such as pavement quality to predict whether overall quality will improve based on current expen- diture levels. Their predictions will ultimately be validated against year-end results. Other initiatives include developing new tools to improve data and information quality and reviewing the agencyâs organization to improve business practices and identify cost efficiencies. In some cases, a problem identified through strategic planning can be solved not through a real- location of resources but through a change in practices. Agencies can encourage creative solu- tions by encouraging employees to be creative (some even hold innovation competitions) and creating forums to share ideas. Employees that present innovative ideas should be encouraged to demonstrate, with the use of performance measures, the benefits of their ideas. 2.1 Performance Management Figure 2.3 presents the performance management system as a continuous cycle consisting of four key components: selecting measures, setting targets, making decisions, and evaluating the system. The third of these steps, using performance measures to make decisions, is the primary 16 Transportation Performance Management: Insight from Practitioners Figure 2.3. Performance management structure. Customer Engineering Fiscal Strategic Planning Process Performance Management System Reporting (Internal and External) Initiatives Vision/Mission Goals Objectives Resource Allocation Resource Efficiency Select Measures Set Targets Evaluate System Use Measures in Decision-Making
focus of this research. The two basic forms of performance-based decision-making that are influ- enced by a system are those that address resource allocation (âdoing the right thingâ) and resource efficiency (âdoing things rightâ). Performance management is the application of data, analysis, and innovation to support these decisions. Although presented as steps in a process, in practice, agencies often complete these steps in a nonsystematic fashion, using whatever measures and data are on hand to make decisions. An incremental approach is normal and may be desirable if it means that an agency is addressing its most pressing challenges first. 2.1.1 Performance Management Life Cycle 126.96.36.199 Selecting Measures Whether performance measures are selected in conjunction with strategic plan development or in a separate process, the strategic plan should serve as the guiding document in selecting per- formance measures. Measures should reflect agency goals and objectives, providing the data needed to answer the question, âhow are we doing?â To the extent possible, measures should be outcome-oriented, meaning that they examine the impact of decisions made, rather than sim- ply the amount of resources being devoted to a particular practice. Examples of outcome- oriented measures include pavement quality ratings, crash rates, congestion levels, air quality, and customer satisfaction. Input- and output-oriented indicators, which directly measure the quantity of a service pro- vided or the amount of resources devoted to a particular practice, are appropriate when they are used to estimate or predict progress towards a goal. For example, as discussed in the previous section, many agencies maintain predictive models for items such as pavement condition. In this case, an output-oriented measure such as the number of lane-miles of highway resurfaced offers a useful tool for predicting expected outcomes. These predictions can later be validated against year-end results and, in turn, used to better calibrate the predictive model in the future. The measures that an agency chooses to collect and track data should be specific enough to directly address the objectives set out in the strategic plan. For example, systemwide pavement smoothness ratings do not distinguish heavily traveled Interstates from lesser-traveled state high- ways, nor crucial linkages from those that may have redundant alternate routes available. An alternate measure might examine pavement quality on a subset of the stateâs most important roads, such as Floridaâs Strategic Intermodal System. Ultimately, the specificity and relevance of an agencyâs selected measures are far more important than the completeness of its overall menu of performance measures. It also is important to employ measures that can be tracked incrementally and compared against performance targets (see Section 2.2). Performance targets are often ambitious, and measurable incremental progress may be an important indication that the agency is doing the right things but needs to further step up efforts. Some agencies have actually developed ârate of changeâ measures that explicitly examine trends in performance. One of the most significant challenges in selecting measures will be between consistency in measurement and evaluation and the desire to improve measures over time. As data collection and analysis improves, new measures will become possible that better reflect a particular out- come than whatever measure is currently in use. Regularly refreshing and updating measures is a necessary part of performance management, but these updates can have negative consequences for an agency. Agencies should be careful to update measures only when the new measures clearly improve the decision-making process. Maintaining existing measures helps provide continuity throughout the overall process and provides historical information that agencies can use to understand trends in performance. Performance Management Structure 17
188.8.131.52 Setting Targets Performance targets are the gauges of success that support and advance an agencyâs strategic plan. Without them, objectives are abstract concepts. To be useful, targets must do the following: 1. Be ambitious enough to represent real accomplishments. 2. Be achievable. If a target is perceived as unrealistic, the motivation to pursue it may evapo- rate as resources are redirected towards more realistic goals. 3. Contain specific time horizons and be short-term enough that progress can be measured monthly, quarterly, and/or yearly. Ideally, targets that support strategic planning objectives should look no more than 2 or 3 years ahead. 184.108.40.206 Using Measures in Decision-Making Ideally, performance management begins at the strategic level, where the setting of agency goals and objectives implies certain resource allocation priorities from the start. However, DOT decision-making is far more nuanced than simply deciding that a particular function or out- come, such as pavement smoothness, is where the agency will invest its resources. There are numerous business decisions made within individual divisions or business functions that can benefit from a performance-based approach. This research examines at least five types of man- agement decisions, described in the following paragraphs: â¢ Strategy Decisions: Largely discussed in the previous section, these entail top-level decisions about where the agency needs to focus its resources and what types of approaches are most likely to yield positive results. â¢ Resource Allocation and Programming Decisions: Within a given division, office, or busi- ness function, performance-based resource allocation ensures greater consistency and accountability. This may be accomplished through development of a project prioritization tool, often used for such things as ranking highway investments. These tools generally utilize a number of outcome-oriented forecasts of a projectâs positive impacts, combined with lag- ging indicators that demonstrate the need for a project (congestion, air quality, economic con- ditions, etc.). In addition to making decisions about how to allocate resources, some agencies also have developed tools for determining where to allocate them at an aggregate level. For example, transportation assets in Florida are included in the Stateâs multimodal Strategic Intermodal System (SIS) through a data-driven designation process. Investments in the SIS are deter- mined through use of the Strategic Investment Tool (SIT), a performance-based project pri- oritization tool. â¢ Operational Decisions: Performance-based operational decision-making is focused on using resources more efficiently. This encompasses a diverse range of DOT issues such as incident response team deployment, road work policies and scheduling, and organizational initiatives. â¢ Human Resource Decisions: More and more agencies are recognizing that transitioning to a performance management program at a DOT involves a fundamental change in the way that employees at all levels understand the nature of their work and the importance of their indi- vidual contribution. One way to promote this âculture of performanceâ is to establish that each employee has a stake in the agencyâs overall success. In addition to holding managers accountable for their departmentsâ performance, many agencies also have begun to hold individ- ual employees accountable for agencywide performance through incentives and bonuses and by incorporating agency and department performance into individual employment reviews. In all of these areas, it is important that performance management should support both effec- tive decision-making (allocating funding, human resources, etc., in a way that matches agency pri- orities) and efficient decision-making (making the most of these resources once they are allocated). 18 Transportation Performance Management: Insight from Practitioners
220.127.116.11 Evaluating the System Performance management should discourage complacency in a public agency that might oth- erwise be slow to embrace and adopt change. Likewise, the management system itself must be reg- ularly evaluated and updated as necessary. The natural interaction between setting strategic agency priorities and selecting performance measures and targets will lead to changes in both pri- orities (as performance data demonstrate more effective or efficient courses of action) and meas- ures and targets (as changing priorities require new measures or updated targets). Additionally, technological advances and feedback from employees and external sources may lead to the devel- opment of improved measures, more reliable collection methods, or an upgraded data system. Although measures should be updated periodically to ensure consistency with agency priorities and strategic plans, there are significant benefits associated with maintaining a stable collection of measures. Internally, consistently collecting and reporting the same measure for several years enables the in-depth analysis of long-term trends. Externally, consistent measures can make it eas- ier for stakeholders to fully appreciate progress that is being made or new challenges that arise. 2.2 Reporting Performance reporting inevitably occurs as part of any performance management program, and the form and frequency of performance reports should not be an afterthought. Reporting performance is in itself a key component in developing a culture of performance management throughout the DOT. Frequent public reporting of results can produce numerous positive results, including: â¢ Building credibility, accountability, and trust between the DOT and its constituencies, includ- ing the public, the legislature, and the agencyâs own employees; â¢ Strengthening support for budget and program proposals; â¢ Promoting friendly competition and information sharing between districts and offices that experienced differing results; and â¢ Creating an expectation of continued reporting and incremental improvements which serves to solidify the performance program. One overarching goal of performance management is to increase transparency and account- ability of decision-making. Translating the analysis conducted as part of performance manage- ment into usable reports for legislators, stakeholders, and the public is an important component to the overall success. The insights presented in Chapters 3 through 6 describe some of these con- nections in more detail. 2.3 Introduction to the Practitioner InsightsâPractices to Ensure Success As stated throughout this Guidebook, every DOTâs circumstances are unique. There is no one solution or one-size-fits-all, step-by-step implementation plan that can be applied to any agency at any time. The most significant differences among agencies include agency size, governance and oversight structures, the extent of existing performance measure and management pro- grams, and the top-level priorities and challenges that underpin the agencyâs decision-making processes. As an agency undergoes the transition towards a more performance-based decision- making and resource allocation process, it must do so in ways that fit the individual needs and circumstances of that agency, its employees, and its customers. Performance Management Structure 19
The remainder of this Guidebook is devoted to providing DOT leaders with insights that will help them as they craft solutions to their unique challenges and address their agencyâs specific goals. The four chapters that follow describe the insights learned from practitioners about how performance management can help an organization improve the way it allocates and uses resources. These insights were synthesized from a combination of sources, including published research, agency reports, and interviews with agency officials. While the majority of the infor- mation comes from Departments of Transportation (DOTs), ideas and practices from other agencies, including local governments and a transit operator, are included where appropriate. Each of the following four chapters covers a broad topic pertaining to the value of and appli- cations of performance management: Organizational Focus (Chapter 3); Engaging Employees (Chapter 4); Engaging Customers (Chapter 5); and Sustaining the Performance Management Program (Chapter 6). Within each of the topics are three to four more focused insights, each of which is supported by specific guidance and examples from the research. The overall matrix of insights is shown in Table 2.1. 20 Transportation Performance Management: Insight from Practitioners Topic Insight Initiate a Performance Management Program to Identify and Address or Avoid a Compelling Problem As a Program Develops, Use Measures to Diagnose Problems Support Performance Management with a Nimble Strategic Planning Process Use Performance Management to Help an Organization Focus Use Performance Management to Improve Agency Transparency Senior Management Must Support the Program Hold Staff Accountable for Agency Performance Empower Staff to Take Ownership of the Program Performance Management Must Engage with Employees Employee Challenges Are Inevitable Align Performance Targets with Customer Expectations Learn How to Better Balance Multiple Constraints in Decision-Making Performance Management Requires a Customer Focus Build Agency Credibility via Modest, Customer-Focused âQuick Fixesâ Senior Management Must Work to Institutionalize Performance Management Ensure Many DOT Managers and Employees Are Involved in Performance Management Use Performance Management to Build Bridges with State Legislators Sustain Performance Management by Building Constituencies Make Performance Management Efforts Visible to the Public Table 2.1. Performance management insights matrix.