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Performance management

Effective performance management is critical to the success of a well-run public entity. Responding to an organisation’s actual performance can improve outcomes.
Top three things you need to know:
  • Performance management is about taking action in response to actual performance.
  • Although systems and documents are important, they need to be part of a wider performance management framework.
  • Leaders need to maintain a clear focus on performance so that everyone understands that performance matters, and is motivated to take action when needed.

Responding to performance may seem an obvious thing for managers to do, but for performance management to be effective certain key elements need to be in place.

Identify outcomes – the benefits for New Zealand that you are contributing to

Effective performance management requires an organisation to be clear why its work matters and what it wants to achieve. This should motivate the people who work there.

Don’t confuse outcomes and outputs

Outcomes, or "Community Outcomes" are often referred to alongside outputs (and many people get confused between the two), but they are actually quite different.

Outcomes relate to changes in society, the economy, the environment, or the community (for example, people’s incomes, the crime rate, the state of people’s health). They are desirable and have a positive effect on people’s quality of life. Public entities cannot achieve outcomes directly, but they can influence them.

Outputs are the goods and services produced by public entities and provided to third parties. Outputs are externally focused because they are what the public experiences, but are within the control of the public entity to manage. In some parts of the public sector similar outputs can be grouped into “output classes”.

Performance measurement can be applied to outcomes, outputs, and pieces of internal work (such as implementing new systems). The principles of performance management apply at all levels.

Translate outcomes into something meaningful for staff

Many organisations use strategies, business plans, service plans, and individual performance agreements to document the outcomes and outputs to measure and manage performance against. In most areas of the public service, elements of this documentation are prescribed, but others are for public entities to devise themselves. Either way, it is important that everyone knows how their own performance contributes to the organisation achieving its outcomes.

Set performance measures and targets

Targets need to be agreed to determine whether performance is adequate or requires intervention. Managers need to be able to measure performance against targets, either:

  • directly by assessing what is actually produced, delivered, or achieved using performance measures (for example, the quality of policy reports produced, turn around time for regulatory processes); or
  • indirectly by using performance indicators (for example, percentage of service users who are satisfied).

Monitor and report so you know your current performance

Performance needs to be monitored so that managers know when to act and what to do.

Applying this approach throughout an organisation requires being systematic about measuring against targets. Co-ordination is important so that people best placed to act get information about actual performance when they need it.

Review and evaluate

Use the results of performance monitoring to inform your future strategies, plans, and approach to service delivery. If performance information shows that things are not working, change them.

Performance management is more than just systems of outcomes, outputs, targets, and measures

Ownership and accountability for performance are important for individuals as well as those they manage. Managers need the power and support to respond to performance information promptly, or performance is likely to continue drifting away from the targets.

Performance measures and indicators are a manager’s early warning system and need to be used proactively. They are not just something to be reported against once a year.

Support effective performance management – it needs consistent reinforcement

A focus by senior management on performance motivates people to deliver against targets, put effort into monitoring performance, and have the courage to take necessary action even though this might be challenging.

Research shows that there are six reasons why performance management fails:

  1. lack of interest from leadership;
  2. insufficient time to reflect and learn;
  3. too many priorities;
  4. lack of understanding of the need to change;
  5. too many confusing targets; and
  6. inherent or chronic under-performance by individuals.

Effective managers need to recognise these barriers and make it clear that performance matters.

Seek additional advice as needed

Your organisation may benefit from assurance on its performance management. Audit New Zealand’s in-house experts can review your current arrangements and work with you to develop and implement solutions. Contact your Audit Director if you want to know more.

Advice for your sector

Central Government and Crown entities

The Treasury produces guidance for Government Departments, Offices of Parliament, and Crown Entities on the requirements for developing and reporting accountability information, including annual reports, statements of intent, and output plans.

The Public Finance Act 1989 requires that a department provide information on its future operating intentions at the start of each financial year (section 38). Statements of Intent (SOI) and Information Supporting the Estimates (ISE) provide a base against which the department’s actual performance can later be assessed. The SOI must include main measures and standards that an entity intends to use to assess and report on matters relating to the department’s performance. The ISE is a forecast statement of service performance that includes measures and forecast standards of output delivery for each class of output.

Crown entities are required to prepare SOIs under the Crown Entities Act 2004. Two broad sets of information are required:

  • a medium-term set of information (section 141) and
  • an annual set of information (section 142).

The medium-term set of information looks out a minimum of three financial years into the future and provides a succinct, strategically orientated description and explanation of what the Crown entity is trying to achieve in that period, how it intends to achieve this and measure the progress made, the challenges it will face, and the implications for its capability.

The annual set of information covers the first year of the SOI, including the forecast service performance. There should be a clear link between the two sets of information to align the annual and medium-term plans and to show that progress is being made in the first year towards meeting the Crown entity’s medium-term objectives.

To demonstrate accountability for the use of public funds, public entities are required to report on the extent to which agreed service performance measures and standards were met.

Health

The Ministry of Health funds, monitors, and manages the performance of district health boards (DHBs) and other health-related Crown entities to facilitate the delivery of the New Zealand Health and Disability Strategies. Elements of the health sector performance framework include:

  • the DHB Planning Package (District Annual Plan Guidelines, Statement of Intent Guidelines, Operational Policy Framework, Service Coverage Schedule, and DHB Reporting Requirements);
  • the Crown Funding Agreement;
  • Health Needs Assessment; and
  • Hospital Benchmark Information.

Tertiary education institutions

The Performance and Information Management Group within the Tertiary Education Commission (TEC) monitors and reports on tertiary education performance and ensures the public availability of tertiary education performance information. TEC works with the New Zealand Qualifications Authority (NZQA), the Ministry of Education, and representatives of the tertiary education sector, to improve performance management in the sector.

Local government

The Local Government Act 2002 requires local authorities to meet the needs of their communities in an effective and efficient way. Community outcomes are used to define the results that local authorities work towards with their local partners.

A local authority’s long-term council community plan (LTCCP) must include “a statement of the intended levels of service provision for the group of activities, including the performance targets and other measures by which actual levels of service provision may meaningfully be assessed” (schedule 10, Part 1, 2(a)). Effective performance management is integral to delivering successfully against the LTCCP.

Where you can get more information

Page last updated: 27 August 2012