Santa Barbara County 1998-99 Grand Jury Report
Performance Based Budgeting
Released March 15, 1999
The County of Santa Barbara has adopted performance based budgeting as a model for measuring government performance, accounting for the expenditure of public money and ensuring meaningful improvements in services provided to the public. For the last two years, the County of Santa Barbara has included recurring performance measures in their adopted budget. Each department has been tasked with the development of measures that reflect its strategic goals and will provide useful information in the future. The process is still in the development stage, and the departments are making many refinements as the procedure develops. The Grand Jury is supportive of the concept of performance based budgeting, which includes the development of recurring performance measures.
To evaluate performance based budgeting as a strategy for government accountability, with an emphasis on recurring performance measures as a key element in the strategy.
To better understand performance based budgeting and recurring performance measures, the Grand Jury interviewed the Auditor-Controller, various department heads and staff members of departments. In addition the Jury attended Financial Information Network training, budget training for department heads and staff and quarterly evaluation meetings for the selected departments to observe the ongoing evaluation of recurring performance measures. Materials reviewed for the study included an in-depth review of the Santa Barbara County budget for 1998-99 and its recurring performance measures, the Strategic Plan for the Board of Supervisors and County and material provided by the County and by Performance Strategies, Inc., related to performance based budgeting. The Jury also compared recurring performance measures from 1997-98 to those developed for 1998-99 in three selected departments.
The passage of the federal Government Results and Performance Act of 1993 renewed public-sector interest in the practice of measuring performance in an attempt to fight waste, improve performance and efficiency and provide accountability to the public. All of these functions come under the umbrella heading of "performance based budgeting." Performance based budgeting is a continuous cycle of:
While all elements of the cycle are important, this report focuses on the development of useful performance measurements and measuring and reporting on strategic goals and objectives.
Performance measures are intended to provide a link to the strategic goals of a specific plan and the resource allocations in a budget. Figure 1 illustrates a model for the process as it is usually implemented.
Recurring performance measures accumulate and report data that is stable and replicable. When developed correctly, recurring performance measures allow quantification of the underlying performance of a particular service. At the most basic level, recurring performance measures measure quantity of work. At more advanced levels, recurring performance measures measure efficiency, effectiveness and productivity. In order to develop meaningful recurring performance measures there must be a clear definition of the underlying process employed by a particular department.
If recurring performance measures are not chosen and implemented with care, quality of service can actually decline and primary goals of an organization can be lost in the attempt to meet the measurement requirements. A good example of this is tracking the number of phone calls in a department and how quickly those calls are returned. If the staff, in an effort to meet the time measurement, hurries to return the calls, the quality of the call may be diminished, thereby providing less satisfactory service to the customer. Also, experts in the field caution that relying on performance data for individual performance evaluation, linking pay to performance or developing new strategies can be dangerous if those measures are not clearly articulated and valid.
Performance measurement as an element of a larger process of strategic planning, compels organizations to develop a consensual vision of the future, and to create realistic, measurable objectives. Those objectives along with performance measurement can lead to new strategies and planning. The ultimate goal is to reorganize the budget to show resource allocation decisions arranged by strategic objectives.
The Grand Jury interviewed county personnel from three departments during its study of performance based budgeting. Department heads, managers, supervisors and line staff were interviewed in an attempt to determine how recurring performance measures (RPMs) were created, implemented, communicated and evaluated, as well as how they related to performance based budgeting.
Departments were initially given theoretical training in identifying and developing recurring performance measures and at the same time were given instructions to develop measures for each of their departments by cost centers. In the first year the measures were not always well defined, nor was the resulting data always meaningful. Most measures implemented initially were quantitative in nature and measured workload only. It appears there was little or no attempt to add measures that addressed efficiency, effectiveness or productivity. In addition, development of recurring performance measures with regard to significance of activity for each department has been hindered by the lack of well-defined departmental strategic plans. Progress has been shown this year and many departments deleted measures and added new measures in an attempt to obtain more accurate and reliable information about their services.
Training was directed at upper management, with little or no input from second-line supervisors or line staff. This year there have been several continuing sessions for upper-level management.
Communication of the importance of RPMs to the staff at levels below management has been inconsistent. Most front-line staff and supervisors are only marginally aware of recurring performance measures and their impact on the County. The Grand Jury observed that RPMs were expressed more theoretically and less practically as one moved higher up the management chain. RPM theory is generally accepted and endorsed at all levels but not well understood by the County personnel interviewed. All these personnel expressed a desire for more training in developing and understanding RPMs.
The County has attempted to communicate recurring performance measures to the public by including them in the annual budget document. It was observed, however, that in many cases the value of the measure was not clearly communicated nor its value understood. In addition, there has been little attempt to incorporate public response to customer service in RPMs. In some departments there has been an effort to do this utilizing customer questionnaires. RPMs using the data from these questionnaires can help measure the qualitative aspects of performance that are often difficult to measure.
Performance measurement is followed by reporting to the County Administrator’s staff quarterly. Since the advertised purpose of RPMs is to give management information to allocate assets and resources more efficiently, this process is intended to keep departments on track and offer an objective analysis of progress in meeting goals.
Of major concern to staff was the ultimate use of RPMs. The primary goal for performance measurement is to focus the department on its important tasks by collecting and evaluating data to effect continuing improvement of a process. It is important to retain that focus when utilizing the results of the measurements. Staff was supportive of measuring processes as long as the stated goal—to allocate assets and resources more efficiently to improve process—was the actual goal. There was some concern at all levels that the measures could be used in a punitive manner.
When recurring performance measures have been perfected and reliably provide data to improve performance, it is possible to reward performance of employees using recurring performance measurements as the basis. As an example, this year the county has negotiated certain salary considerations using performance measure achievement as the basis for salary increases. If those measures are achieved, salaries will be increased based on the rise in property tax revenue. The Grand Jury liked the idea of tying salary increases to improved performance. However, tying salary incentives to attendance did not appear to be directly related to improved performance and seemed premature to the Grand Jury. Increased attendance does not necessarily guarantee increased performance.
The Grand Jury observed that there are varying levels of commitment to the concept of performance based budgeting and recurring performance measures. The County has expended significant resources to implement this program and plans to see valid results at the end of the third year. Every effort should be made to implement this program quickly and correctly in order that useful information can be produced and utilized by departments. All County employees should make every effort to understand their role in the implementation of the program. The key to the success of performance based budgeting lies in the support of the elected Board of Supervisors and those groups in the community who are interested in promoting effective government. The Grand Jury believes that if support for the program is not clear and sustained the program will fail.
Many recurring performance measures seem to be unrelated to the department’s significant activities and at the same time there is an absence of measures for significant departmental activities.
All departments should develop recurring performance measures that reflect activities that are key service differentiators, make up a high percentage of cost and are capable of being improved.
Numerous recurring performance measures for each department studied were developed and implemented without clearly observable links to department strategic goals and objectives.
All departments should reevaluate their RPMs. The number of RPMs should be reduced and each one should be more selective, more challenging and more clearly linked to the mission statement of each department.
Current recurring performance measures largely focus on quantitative results, many of which are related to timely performance and are unnecessarily brief, lacking detail that could make them more understandable and meaningful, showing the true significance of what is being measured.
(a) All departments should use recurring performance measurements that show the value of the activity in relation to entire scope of data available. For example, if a department plans to increase an activity by 5%, it is necessary to understand what the prior level of the activity was and how significant that is in terms of total universe for the activity.
(b) All departments should consider each quantitative measurement in terms of potential negative side effect and develop RPMs that measure the qualitative aspects of those measures.
(c) All departments should break out data for outcome and service-quality indicators to help staff in assessing the success and shortcomings of the recurring performance measure. This may mean the expansion of cost centers to more accurately reflect the department’s activities.
Training for department heads and managers with respect to techniques for developing RPMs was reported to be insufficient. As a result, many recurring performance measures are not defined well enough to provide meaningful data over time.
The County Administrator should offer extensive additional training, including department specific training, for department staff on an ongoing basis after the introduction of performance based budgeting, especially in the area of developing RPMs. A significant portion of the training should occur as a working session, not as a general theory class.
Management staff was responsible for developing the initial RPMs and the county’s front-line workers have little knowledge or understanding of RPMs.
(a) The County Administrator should provide staff training and workshops at all levels to create a "buy in" to recurring performance measures by staff as part of a team-building process.
(b) All departments should include discussion of relevant RPMs in each employee’s annual performance review.
Quarterly reviews are held with each department to evaluate actual performance (degree to which the measure is being met) but little time is spent discussing the reliability or value of the measure itself as it is written. In addition, there is no stated plan for benchmarking with other agencies using performance measure information.
The County Administrator should develop a comprehensive plan to address continued refinement of the RPMs themselves and benchmarking with other agencies using performance measure information.
The County has tied salary increases to performance measures that do not directly improve specific departmental processes..
The County Administrator and all individual departments should refrain from introducing significant changes or incentives associated with specific recurring performance measures until the measures are consistent and reliably measure the primary processes within departments..
Findings 1, 2, 3, 4, 5, 6, 7,
Recommendations 1, 2, 3, 4, 5, 6, 7,
All Department Heads(respond collectively through County Administrator)
Findings 1, 2, 3, 5, 7
Recommendations 1, 2, 3, 5b, 7
The Grand Jury applauds the County’s effort to implement performance based budgeting, including recurring performance measures, as a planning strategy for the County. The Grand Jury also commends the Board of Supervisors for their commitment and ongoing support of the program. The very process of developing performance measures results in the scrutiny of goals and objectives by each department as well as the supporting processes. If the goals and objectives are focused and clearly articulated and the measurements valid and reliable, the results will be a continuous improvement of each department and greater job satisfaction for the employees.