Rethinking the costs and benefits of performance management: many organizations assume that performance management is basically a stand-alone program. In reality, performance management is a crucial element within many best practice standard government processes.

• Author: Mucha, Michael J.
• Position: [PM.sup.2] Connections: PERFORMANCE MEASUREMENT & MANAGEMENT

In organizations that aren't using performance management, finance officers are often asked to demonstrate the benefits of such a system relative to the costs. It isn't especially difficult to estimate the costs of establishing and maintaining a system. This would include the cost of training employees and managers to build necessary skills; staff time to collect, analyze, and report on measures; and the costs of technology such as a business intelligence of dashboard system to help collect, analyze, and report on those measures. Additional costs could include the price of a Web site of printed reports to communicate information gathered by the program, or perhaps an additional employee of external consultants to coordinate the use of performance information.

Identifying benefits is more difficult, however, because it is almost impossible to place a dollar value on having better information for decision making and a better understanding of citizens' needs and preferences. Of a method of allocating budget dollars to effective programs, based on evidence, accountability, and transparency. Or the ability to understand the strategic link between programs and goals.

Even benefits that do result in savings, like greater efficiencies within a program, are usually mitigated somewhat by the likely increase in service level. If you take a hypothetical program and use performance management to cut transaction and processing costs in hall, the actual budgetary savings might not be 50 percent. That's because once staff time is freed up, employees are also able to provide better service that wasn't possible before, and your organization might be able to provide a better service more efficiently, at, say, 33 percent less than before. The end result is a better benefit for citizens, but quantifying that improvement into return on investment (ROI) calculations isn't easy.

PART OF THE PROCESS

In fact, doing an ROI calculation assumes that performance management is basically a stand-alone program, or perhaps an add-on program--a discrete investment, similar to a new capital project or technology initiative. In reality, performance management is a crucial element within many best practice standard government processes. It is misleading to ask if your organization does performance management. The best systems treat performance management as an integrated piece of an overall management approach. Performance management by itself accomplishes little, and many...