Sunnyvale's outcome management: taking performance budgeting one step further.

• Author: Chan, Amy
• Position: City of Sunnyvale, California

High-level outcomes as articulated by city council, not organizational boundaries, determine the structure of Sunnyvale's programs and its outcome-oriented budget.

Each year the Government Finance Officers Association bestows its prestigious Award for Excellence to recognize outstanding contributions in the field of government finance. The awards stress practical, documented work that offers leadership to the profession and promotes improved public finance. This article describes the 1996 winning entry in the communications and reporting subcategory of the budgeting and financial planning category.

The City of Sunnyvale, California, is managed using the philosophical approach described in the city's planning and management system (PAMS). This system, which originated in the late-1970s, integrates long-range policy planning, long-range financial planning, results-oriented budgeting and management, and pay-for-performance. PAMS evolved over the decades without undergoing a comprehensive review, in contrast with the private sector, where leading firms restructure and reorganize every few years. In June 1994, the city manager, believing that the time for such a review was at hand, appointed an interdepartmental task force to examine where the organization was and to set a path for where it should be in the 21st century. The Future of the Organization Task Force's charge was not to throw out PAMS but to create ways to streamline it and make it a more powerful tool for both the policy maker (i.e., the council) and staff to use in managing service delivery. The task force's work resulted in Sunnyvale taking its performance budgeting one step further to create an outcome management system. The development and implementation of the new system are described in this article.

Focusing on Outcomes

The task force focused its attention on two critical aspects of PAMS: the performance budget and the management evaluation process. The budget subcommittee, whose work is the subject of this article, began with several focus groups composed of staff at all levels of the organization to learn more about the perceived strengths and weaknesses of the existing system. It found that, despite the city's history of performance budgeting, some of the measurements were outputs, not outcomes. Others simply no longer had meaning. Finally, while PAMS' principle was carried out in spirit, many policies, procedures, and practices were either too complicated, too control-oriented, or not applied consistently. The process needed to be simplified and easier for all to understand the philosophy and use it for managing service delivery. The structure should clearly define customer-driven service outcomes: why the city is providing the service, how it will be provided, and what measures should be used to determine success.

Armed with the focus group data, the subcommittee developed a series of guiding principles for a new budget structure, which were approved by the department directors. The guiding principles were based on the notion that the budget structure should

* be focused on outcomes,

* provide simple and accessible information,

* be understood and used by all,

* be flexible and responsive to the customer,

* support interdepartmental efforts,

* measure achievement,

* encourage continuous improvement, and

* assist with strategic planning and demand management.

The subcommittee then set out to address as many concerns as possible while maintaining a highly accountable, performance-oriented structure. The structure developed - outcome management - is a fully integrated, outcome-oriented budgeting and management system.

Outcome management is concerned with the end product, not the process. It is based on the premise that developing city program structures begins with defining high-level outcomes and flows from there. The system requires the city council to determine and articulate precisely what the desired high-level outcomes are. This is done through approval of the budget. The staff focuses its efforts directly on achieving the outcomes and is given greater latitude to determine the best methods for achieving the outcomes, although the council provides direction on the relative priorities of the services.

The budget structure is based on the concept that every program will be outcome-oriented. The first step in creating a program is defining its outcome. An outcome is the ultimate result that the city tries to achieve through service delivery. Outcomes are derived from the goals and policies of the general plan and its subelements, the city's long-term, strategic planning documents. To identify outcomes, two fundamental questions must be answered:

* For what purpose does the service exist?

* What results can be expected from the city's efforts?

A program, essentially an organizational tool to help implement the long-term goals of the city, consists of the services necessary to achieve its outcome. Sunnyvale develops its programs using a clean-slate approach that discards preconceived notions regarding organizational boundaries. In fact...