Performance management as a sustainable enterprise: the Washington State Transportation Improvement Board's example.

• Author: Edds, Daniel B.
• Position: Company overview

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Developing a system of performance management and then sustaining that system over time is a significant challenge, but doing so yields significant rewards. Sustainable performance management has four levels: planning, budgeting, management, and evaluation. Getting to the point where performance management actually causes change means moving beyond planning and budgeting, and into the sustained execution of managing processes and continuously evaluating the results. The case study contained in this article is the perfect case in point: the Washington State Transportation Improvement Board's transformation from a failing agency to a success story is an award-winning example of effective performance management.

BEGIN WITH A FORMAL STRUCTURE

There are several established management frameworks organizations can use as possible structures for a performance management system--the balanced scorecard, cooperative benchmarking, performance budgeting, performance reporting, Stat systems, strategic cascading systems, and the criteria for the Malcom Baldrige National Quality Program Award. The value of these frameworks is that a proven architecture provides a disciplined approach to improving business processes, identifying key performance indicators (KPIs), and directing where change will have the greatest impact.

The main factor shared by all the popular performance improvement frameworks or systems in the last 30 years (Total Quality Control, Total Quality Management, Activity Based Costing and Management, Lean, Six Sigma, Balanced Scorecard, and Baldrige) is the requirement that organizations identify, control, and manage processes. As W. Edwards Deming famously said, "If you cannot describe what you are doing as a process, you don't know what you are doing." The reason is simple. Processes are what turn the assets and raw materials of any organization into useful products and services. A local fire department might have the best equipment money can buy, the fittest fire fighters, and the best dispatch technology, but disciplined processes that have been established over time are what put the equipment and personnel at the right place at the right time to extinguish the blaze in the most effective manner.

Process management deals with many variables, but the following concepts are crucial to making improvements.

Identify, Monitor, Measure, and Maintain Mission-Critical Processes. Pilots manage the complex processes that fly airplanes by using a simple tool: checklists. A checklist provides for the routine maintenance of the process and, in doing so, reduces the risk of catastrophic loss.

Make Sure an Individual or Group Owns Each Process. Improving processes, which means improving output relative to resources consumed, requires leadership. Someone or some group must own the responsibility of improving mission-critical processes. If no one is responsible for a process, it will never change, and however good the manager, output will only improve at the margins. Real innovation will not happen.

Performance indicators that are not linked to core business processes are isolated numbers. KPIs that are linked to a core process are the foundation to innovation and dramatic improvements in results.

Set Control Limits. Most...