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INTERNATIONAL QUALITY AND PRODUCTIVITY CENTER CONFERENCE
INTEGRATING STRATEGIC PLANNING, PERFORMANCE MEASUREMENT,
BUDGETING AND CUSTOMER SATISFACTION IN GOVERNMENT
NOVEMBER 17-19, 1997 WASHINGTON, DC

Conference Goal

Summary of Presentations

Aligning Accounting And Budgeting Infrastructures With The Annual And Strategic Plans
(Robert W. Gardner, Chief Financial Officer, U.S. Department of Veterans Affairs)

• Alternate Title: Can GPRA zealots and federal budget traditionalists be friends?
• The goal is to understand what the budget does and have it focus on outcomes.
• The budget happens but planning doesn't always happen. Planning should drive the budget.
• Need to develop a new budget and accounting infrastructure that supports strategic and annual plans. Cost accounting is important.
• Use cost accounting to spread overhead across program accounts. Emphasis should be on programs or business lines, not overhead. Still need performance measures and goals for overhead and support activities.
• Need to sell your oversight agents on the new approach, especially the focus on outcomes. Find something everyone will like as the first stage. Accommodate political realities with adjustments.
• Alignment of planning and budgeting is the key to success in achieving strategic planning and performance management.
• GPRA will fail without changes in budget infrastructure.
• Budget and planning shops must be integrated. If they are not closely related in the same organization, the leadership of each must closely coordinate and cooperate.
• Progress can and will be achieved over time. Be patient! Do it because it's right not because it's the law.

• Provided a brief overview of GPRA and reviewed two NAPA reports, Lessons Learned I and II, on GPRA.- Lessons Learned I mostly identified issues for implementing GPRA. Focus was on new report, Lessons Learned II.
• GPRA has had an effective beginning but key elements are missing.
• Congress/agency consultations are uneven. Stakeholder involvement is thin.
• Top leadership commitment is not evident.
• Outcome measurement is at an early stage. OMB and the Congress seem unwilling to pay for the data needed to determine ultimate outcomes.
• Quality control for data needs attention.
• Issue of budget structures versus GPRA performance plans.
• Coordination of major reform legislation is needed (GPRA, CFO, ITMRA, etc.)
• Congressional committees, especially appropriations committees, must use performance data. However, Congress should avoid micro-management.

• Described planning process at the Navy Medical Department. Mission is to provide forward deployed care and managed care. Managed care is now subject to competition.
• The current plan update includes customer satisfaction.
• A successful strategic plan needs performance metrics. There should not be too many. You must have the right ones. They should be supported by data. There should be accountability from senior leaders.
• Need S.M.A.R.T. objectives: Specific, Measurable, Accountable, Realistic, and Time-Phased.
• The key issue is alignment. Resources with planning. Individual performance with organizational performance. Individual goals with organizational goals.
• The strategic plan should be timed to influence long term resources.
• The annual plan should be timed to shape the budget and to respond to the budget.
• The proof of the plan is whether resources are moved as a result of the plan.

Working With Congress On Performance Planning And The FY 1999 Budget: The Latest From The Hill
(Carl DeMaio, Director of Planning And Training, The Congressional Institute, Inc.)

• The Results Act is different. It's the law. It's an imperative due to budgetary constraints and public cynicism. It's the first time the planning structure is integrated into the budget structure.
• Congressional activity is unprecedented, but appropriators become the key now.
• Before you can integrate, you must correct strategic plans and meet with appropriators. Strategic plans need a results focus, clearly defined strategies, niche identification, and cross-agency coordination. Must find out expectations of appropriators and show how performance information could be integrated into existing budget presentations.
• Need to select performance measures. Pick the vital few and decide when to report data. Identify data source.
• Balance the measures and track outcomes. Customer service measures can track quality of activities and outputs, but rarely outcomes.
• Describe coordination with other agencies, but identify your agency's unique contribution to a government wide effort.
• Reflect innovations in agency management and discuss alternative means to achieve goals.
• Tie goals and measures to each program activity and use full cost accounting where possible. Use crosswalks to relate traditional budget format to new performance format and recognize the needs of different audiences.
• Best practices: NOAA and the Coast Guard.
• Results Act Website: www.CongInst.org/results/

Performance As The Key To A Comprehensive Management And Budgeting System: A Congressional Perspective
(John Mercer, Practice Manager, Government Performance Consulting, FDC Technologies)

• Former mayor of Sunnyvale, California (whose budget and planning system partially inspired GPRA) and former Counsel to the Senate Governmental Affairs Committee where he led the effort to draft GPRA. Considered by many to be the father of GPRA.
• There is a proposed House Bill HR 2883 (11/7/97), GPRA Technical Amendments of 1997, which could re-do strategic plans before September 1998.
• OMB has deferred GPRA performance budgeting pilots to FY 1999 and FY 2000 because they do not believe anyone is ready to do it yet.
• What is performance budgeting? After pilots, GAO will determine if performance budgeting is practical and useful, and, if so, propose legislation to implement it.
• Hint: performance budgeting shows alternative levels of performance or different levels of performance based on resources. This is the use, if not the definition of performance budgeting.
• The CFO Act intersects with GPRA in terms of FASAB Statement Number 4, Managerial Cost Accounting Concepts and Standards for the Federal Government. This is very relevant for planners.
• Most preferred method of cost accounting is activity based costing (ABC). He wouldn't be surprised if Congress required ABC.
• ABC provides the unit cost which is the single most powerful piece of information.
• Performance budgeting built on a foundation of activity based costing was his vision of GPRA.
• Discussed the Sunnyvale system. Their accounting system provided costs per activity such as the cost of a 911 call as opposed to listing costs such as salaries, equipment, etc. However, you should show costs to appropriators both ways.
• A key issue is apportioning overhead costs.
• He also believes Congressional scoring of strategic plans was fundamentally sound, though one could argue the criteria, weights, etc.

• Some customers are more important than others. 96% of customers don't complain.
• Today's organizational pyramid should be inverted with customers on top and leaders on the bottom.
• Workers need the skills, ability, and responsibility to do the job.
• Bad news is good news because it yields improvement opportunities. Don't shoot the messenger. Relate bad news to the process, not the people.
• A leading indicator of customer satisfaction is employee satisfaction.
• Good plans tell us what needs to be done to benefit the customer.
• Only a few good performance measures are needed.
• Customer satisfaction can be measured from an internal perspective (process performance), an external perspective (bench marking), and a customer's perspective (value to operations and outcomes).
• Customer satisfaction measurements include transactions (measure at or immediately after customer contact), relationships (measure across a series of contacts), and value (measure value added).
• Customer-driven organizations use customer feedback to drive improvement; base resource decisions on cost/benefit defining the benefit from the customer's perspective; and engage customers in strategic planning.
• NSA is using activity based costing.
• Secret ingredient: JUST DO IT! Accept imperfection. Reward those who contribute. Revisit the results.

3. Integration Methodologies and Tools Moving From The Plan To Integrated Implementation: Charting A Course For The Future
(Gary A. Steinberg, Director For Strategic Management, NASA)

• Described NASA's performance measurement system.
• We need to represent our agencies and describe their value to the public. GPRA helps us do that.
• NASA has a 25 year strategic plan because of the importance of research and development. There are four strategic enterprise plans and there are individual center (e.g. Kennedy Space Center) implementation plans.
• Each center developed a particular expertise. Now have centers of excellence.
• The purpose of NASA's performance measurement system is to identify metrics for strategic enterprises, crosscutting processes, and individual programs. Goals of the system are to identify the most important metrics to our external customers and senior management.
• NASA has developed a strategic roadmap which guides strategies and actions over the short term, mid-term, and long term of its 25 year strategic plan.
• The system helps NASA keep emphasizing the need to justify and explain its relevance in a competitive environment for resources.
• At OMB's request, NASA prepared a planning video (starring Walter Cronkite) which is available to other agencies.

The Baldrige-Based Criteria As An Integrated Planning Tool
(Ken Mandley, Mandley Consulting, Co-Administrator, New Mexico Quality Awards and Senior Examiner, President's Quality Award)

• Discussed the Malcolm Baldrige National Quality Award criteria and how they can be used as an integrated planning tool.
• The criteria do not prescribe any specific system; do not place importance on conformance; do not assume or suggest that all organizations have the same requirements; and do not suggest any approach to implementation.
• There are eleven core values: customer-driven quality, leadership, continuous improvement and learning, employee participation and development, fast response, design quality and prevention, long-range view of the future, management by fact, partnership development, organizational responsibility and citizenship, and results focus.
• The Baldrige criteria is based on a systems perspective with seven categories: leadership, strategic planning, customer and market focus, information and analysis, human resource development and management, process management, and business results.
• Within the seven areas are 20 items with each item specifically designed to focus on a major system requirement such as 2.1 strategy development process or 7.1 customer satisfaction results.
• Under the 20 items are 30 areas. Areas are designed to illustrate and clarify the intent of the items and emphasize the types and amount of information required for each item.
• There are organization improvement and strategic planning cycles.
• The planning methodology is based on criteria-based assessment, identification of strengths and areas for improvement, and a prioritization of areas for improvement.
• Overall, the criteria encourage a systems approach, promote a strategic view, meet the requirements of GPRA, and provide a common sense approach to management and leadership.

Integrating Performance Measurements With Strategic Planning And Operational Performance: Myths, Realities And Challenges For The Future
(Dr. Herbert Zagarow, Ph.D., Chairman, QualityAlert Institute)

• The discussion focused on developing and using good performance measures.
• Myth: The challenge of developing and deploying a performance management system that works has been completed.
• Myth: The performance measures are the right set for the organization.
• Myth: Practical methods and strategies for valid data retrieval are in place.
• Myth: The data is being formatted and analyzed to yield keen insights and valid conclusions that can help guide the organization.
• Realities: The scope and complexity has been underestimated and critical success elements are sometimes absent.

• Executive management commitment
• Functional management execution
• Integration of the strategic planning process
• Behavioral and technical deployment
• Value added utilization of performance management system
• Move from measures that focus on activities to those that focus on results.
• Critical success factors include skills such as business excellence essentials (customers, process, and outcomes), use of sophisticated statistical applications, and use of data to manage.
• Critical success factors also include resources such as time, talent, money, and technology.
• The real danger is incompetent people submitting irrelevant information to ignorant people, especially if it's in the form of colorful graphs.

EPA is developing an integrated planning, budgeting, analysis and accountability system that will provide feedback on success of commitments, hold managers responsible for commitments, and provide a way to determine the return on public investments and weigh investment options.- Performance measures include: program output measures (actions we take); program outcome measures (direct results that will lead to environmental improvements); and core environmental indicators (environmental outcome measures, the ultimate results). There are not many of the latter.

• The strategic plan had the outcomes and the performance plan had the activities. EPA is using multi-year planning to bridge the gap between the two.
• Long term goals are linked directly to EPA's annual performance goals and budget request.
• Fundamental changes are being made to EPA's budget structure and financial management system. The entire budget structure for FY 1999 is being redone to integrate planning and budgeting. The appropriations staff is nervous so EPA is using crosswalks to link new and old structures.
• Will be using management cost accounting per FASAB statement number 4 to align planning and budgeting structures. EPA has used cost accounting for the Superfund for years. However, that represents only one seventh of the budget.
• State partners are critical to achieving EPA goals.

• Discussed four techniques for integrating vision, strategy, customer focus, budgets, and tactical plans. These are the five shared concepts, the balanced business scorecard, bench marking, and the measurement dashboard.
• The five shared concepts technique can help develop an interview for senior managers to determine their key areas of consensus and disagreement. The concepts are:
• How will we run the business? - How will we save money?
• How will we make this a good place to work?
• How will we produce value for our stakeholders? - How will we compete?
• The Balanced Business Scorecard is a technique to align critical success factors, performance indicators and targets with the organization's long-term business vision. It involves balancing four perspectives: financial, organizational learning, process/product, and customer.
• Bench marking is a technique used to review and learn from the experiences and lessons learned of other organizations. Bench marking can be qualitative or quantitative. It can be internal (how other units do it) or external (how other organizations do it).
• A measurement dashboard checks that the key performance indicators are moving towards achieving the strategic vision. They frequently are graphical such as dials or bar graphs.
• Keep baseline data appropriate, flexible, meaningful, and consistent and use advanced statistical techniques to analyze it. Research shows that organizations that do, perform better than those that don't.

• Provided an overview of strategic planning at Transport Canada and Civil Aviation, the agency which regulates aviation in Canada. Described agency's response to Canada's fiscal crisis and the need to reform government dramatically which resulted in a government-wide initiative called *Getting Government Right.*- Resulted in a government-wide program review focusing on several tests for public interest, role of government, federalism, partnerships, efficiency, and affordability.
• Decided their mission or Raison d'etre was: *We are here for... Aviation Safety.*
• Developed operating principles to guide them. Looked to the private sector for tools which could be adapted to the public sector. Language was important. It needed to be basic, simple, and descriptive.
• Developed the string theory. This was a series of plans, strategies, reviews, etc., that are connected along a string and need to be worked.
• The string is ever evolving and by no means exhaustive. Items included a strategic and operating plan, a human resources plan, a communications plan, service standards, etc.
• Challenge was to develop a strategy which would weave key program instruments into the fabric of our organization.
• Need to answer key questions: What is the business? How do we contribute to organization's mission? Who is the client? Who do we depend on? Who depends on us?
• Lessons learned include: Make it up as you go; Do it by feel; Beg, borrow, and steal ideas; Step out of the box; One thing leads to another; and There is no end.

• Discussed examples of research work linking employees, customers, and performance.
• Developed his own variation of the balanced scorecard which includes the perspectives of profitability, productivity, motivation, and quality. He emphasized there is an interrelationship among and between all four.
• Discussed the dangers of inexperienced people conducting employee surveys, especially because of the potential legal pitfalls of doing them wrong.
• Emphasized that employee surveys are usually too long with too many questions. Discussed research that shows long surveys result in less deviation in the answers and in a tendency toward higher average ratings as employees plow through the questions. Surveys should probably have no more than about 60 questions.
• To be valid and especially to avoid illegal discrimination, surveys need:
• Reliability: The ability to furnish data that are consistent.
• Criterion validity: The ability to distinguish the elements in a set.
• Content validity: The ability to measure only what is relevant.
• Construct validity: The ability to tap scientifically proven concepts.
• Discussed several methods for measuring linkages between hard and soft measures, especially for GPRA. These methods include:
• Running all possible correlations in the comprehensive data set.
• Using traditional multivariate inferential statistics.
• Using path analysis for a causal model that can measure and predict.

• Two important aspects of the process were identifying and responding to customer needs and identifying unit costs for various services, especially for competing with commercial providers.
• The importance of regular reporting from organizations was also emphasized.
• They created a series of Microsoft Word and Access templates to be used by components in preparing their portions of the plan.

• Ms. Dion described the planning process at NHTSA.
• NHTSA has its own strategic plan and also a strategic execution plan and GPRA performance plan. These can be found at www.nhtsa.dot.gov.
• The program logic model (Inputs, activities, outputs....outcomes) played a key role in their planning process.
• The agency is data rich with several large data bases of information about traffic fatalities and injuries.
• The performance plan is a ten page chapter in NHTSA's budget submission. This includes specific goals and performance measures. The strategic plan contains most of the detailed information.
• NHTSA has already had a budget success from using performance measures. During the 1998 appropriations process, they were able to show how additional resources would be used to improve performance in one program and that program received its first budget increase in several years.
• In 1994 the performance plan was organized by programs. In 1995 they created a cross-functional, outcome oriented structure. In 1998 and beyond, the plan is a section of the budget.

• Ms. D'Ignazio discussed MDOT's strategic planning process which included development of a business plan and a business process identification and assessment.
• They needed to do an organizational cultural assessment and to change behaviors. Finding champions within the organization was also very important.
• They had to make a major transition in their mission from *We build roads* to *We provide mobility and access* in order to cover all modes of transportation.
• There was also strong pressure to change in order to meet new and different customer and partner requirements. They used a total quality approach.
• They developed an enterprise process model and an enterprise map.
• They utilized the balanced scorecard with four perspectives: financial, customer, internal business process, and learning and innovation.
• They chose the balanced scorecard because: the methodology supported and reinforced their strategic efforts; success of methodology in other organizations; simplicity; scorecard is becoming industry standard; and focus on multiple perspectives.
• Anticipated outcomes include a focus on strategic direction, a measure of what's important to MDOT, and alignment of strategic direction and operational activities.
• Supporting activities include regular reporting, a performance management system, process improvement, customer surveys, management systems, and organizational assessments and measures.

Mr. Snyder gave a wonderful analysis and presentation of the technological revolution we are in and its future impact. He distributed an article which captures his presentation very well. It was written by Leslie Ratz and appeared in the August 1997 issue of Mobility Magazine, a publication of the Employee Relocation Council (ERC). The ERC web site is www.erc.org. The address is 1720 N Street, NW, Washington, DC 20036 (202-857-0857).

• A big cause of bad planning is erroneous assumptions about the external atmosphere. His goal is to provide sound assumptions about the future.
• We are in the middle of a genuine revolution -- the kind they write about in history books. If we pull this off like the shift from steam to electricity, we will return to the 1960s level of prosperity within less than 15 years.
• First there is a wave of turbulence and inefficiency before the technology matures and free markets exploit the new technology. The group that spelled this out was the Center for Economic Policy Research at Stanford University.
• Revelation one: You do not retool an entire nation's economy overnight or even in a decade. It appears to take two generations -- 60 to 75 years to assimilate a new technology. The birthday of the computer was February 14, 1946, when they turned on ENIAC.
• Revelation two: During the first half of a technological revolution, general levels of economic performance and prosperity first plunge before they go up. Computers are getting better, faster, and cheaper and we are finally learning how to apply computers productively.
• Revelation three: Seven-eighths of the impact of a new technology arrives two-thirds of the way through the period of adoption and that period lies right before us.
• Expert systems, including case based reasoning systems, simulations, and intelligent agents will play a key role. By the year 2000, it will be common for people to give their computers spoken commands.
• Mr. Snyder's optimistic conclusion was that the United States is at least ten years ahead of any other nation in the technological revolution and that the potential for prosperity and large numbers of high paying jobs lies just ahead of us.

• Performance is value added, not what's expected as a job responsibility.
• It is important to measure fewer things, but be sure you are measuring what's really important.
• The return on investment from a performance measurement system:
• Expected by customers. Look in the mirror. Identify what we do well and what we need to work on. Knowing this will impress customers.
• Provides information that directs organization attention.
• Enhances peer review.
• Helps set priorities for process improvement.
• Allows for setting realistic goals and standards. Should come from competitors, bench marking, and performance data.
• Helps assess the impact of improvement to processes.
• Allows for effective bench marking. Bench marking without data is a vacation.
• Need to have process performance measurement to identify critical elements of the process, to identify baselines, to establish an objective method of evaluation, and to establish an objective method for justifying resources for process improvement.
• There is a seven step process for performance measurements:
• Examine strategic goals.
• Develop operational business objectives.
• Map key processes.
• Evaluate existing business measurements.
• Develop team and individual performance measurements.
• Establish organizational structures to support goals.
• Measure key process and output measurements.
• The performance data must be analyzed with sound statistical processes in order to gain the insights necessary to make decisions.

- Have to link planning to operations. Need strategy oriented plans.

Resources are critical to strategy. Linkage means consequences result from decisions on goals.

There are five elements of dynamic budgeting:

1. Resource strategy
2. Strategic alignment
3. Budget formulation
4. Organizational budget
5. Reconciliation

- An important analytic logic is identify your goal; then identify the obstacles and performance deficiencies that make it difficult to achieve the goal; next identify a strategy to overcome the obstacles and explain the gap; finally identify how resources will solve the deficiencies and overcome the obstacles and explain how much closer you can get to the goal.

- It is also important to review your program logic. Is the program initiative consistent with agency strategic goals? Is it necessary, supportive, and clear? Does the program have clear goals, anticipated outcomes, distinct strategy, and performance measures?

- You need to determine the levels of linkage with the strategic plan in the Congressional budget. Levels of linkage include:

• Summary references to the strategic plan.
• Direct references to strategic goals. Include an assessment of how to increase performance.
• Justifications include specific references to performance goals and outcomes.
• Detailed performance plan incorporated in the budget.

Special Presentation: Update On GPRA Groups And Happenings
-- Given by Carl Metzger, Senior Associate, Management Systems International, Inc.

• Provided an update on GPRA information available.
• The Office of Personnel Management has a CD on GPRA available.
• There is a National Performance Review bench marking document available.
• The *Public Manager* GPRA issue is very helpful.
• There should be some additional OMB guidance on performance plans coming out soon.
• The NAPA Lessons Learned II Report should be available in December 1997.